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We’re Number 1: Price Wars for Market Share Leadership

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  • Luís Cabral

    (Stern School of Business, New York University, New York, New York 10012; Centre for Economic and Policy Research, London EC1V 0DX, United Kingdom)

Abstract

I examine the dynamics of oligopolies when firms derive subjective value from market leadership. In equilibrium, prices alternate in tandem between high levels and occasional price wars, which take place when market leadership is at stake. The stationary distribution of market shares is typically multimodal; that is, much of the time, there is a stable market leader. Even though shareholders do not value market leadership per se, a corporate culture that values market leadership may increase shareholder value.

Suggested Citation

  • Luís Cabral, 2018. "We’re Number 1: Price Wars for Market Share Leadership," Management Science, INFORMS, vol. 64(5), pages 2013-2030, May.
    • Handle: RePEc:inm:ormnsc:v:64:y:2018:i:5:p:2013-2030
    DOI: mnsc.2017.2725
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    Cited by:

    1. Luís Cabral & Gabriel Natividad, 2016. "Box-Office Demand: The Importance of Being #1," Journal of Industrial Economics, Wiley Blackwell, vol. 64(2), pages 277-294, June.

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    More about this item

    Keywords

    dynamic oligopoly; price wars; market shares; ordinal rankings;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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