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Exploring Stackelberg profit ordering under asymmetric product differentiation

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  • Banerjee, Dyuti S.
  • Chatterjee, Ishita

Abstract

The literature on differentiated products only considers symmetric cross-price effects and shows that the profit ordering of firms in a sequential set-up is uni-directional. This paper shows that uni-directional profit ordering breaks down under asymmetric product differentiation. Above a unique cross-price effect level the follower's profit exceeds that of the leader. The reverse is true below this level. This result holds for both substitutes and complements.

Suggested Citation

  • Banerjee, Dyuti S. & Chatterjee, Ishita, 2014. "Exploring Stackelberg profit ordering under asymmetric product differentiation," Economic Modelling, Elsevier, vol. 36(C), pages 309-315.
    • Handle: RePEc:eee:ecmode:v:36:y:2014:i:c:p:309-315
    DOI: 10.1016/j.econmod.2013.09.056
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    Cited by:

    1. Jochen Manegold, 2016. "Stackelberg Competition among Intermediaries in a Differentiated Duopoly with Product Innovation," Working Papers CIE 98, Paderborn University, CIE Center for International Economics.

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    More about this item

    Keywords

    Asymmetric product differentiation; Complements; Profit ordering; Substitutes;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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