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A Unilateral Pricing Policy And The Stackelberg Equilibrium

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  • KAZUHIRO OHNISHI

    (Osaka University and Institute for Basic Economic Science, 2-15-12-102 Hanjo, Minoo, Osaka 561-0044, Japan)

Abstract

Cooper (1986) examines the equilibrium of the retroactive most-favored-customer pricing policy by using a two-period duopoly model. He shows that the most-favored-customer policy enables both firms to offer higher prices and to enjoy higher profits. Neilson and Winter (1992) show that even if one firm in a price-setting duopoly adopts the most-favored-customer policy, the equilibrium does not coincide with the Stackelberg solution. This paper introduces a pricing policy by using a one-period two-stage model and shows that if one firm in a price-setting duopoly adopts this policy, then the equilibrium coincides with the Stackelberg solution.

Suggested Citation

  • Kazuhiro Ohnishi, 2010. "A Unilateral Pricing Policy And The Stackelberg Equilibrium," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 12(03), pages 205-210.
    • Handle: RePEc:wsi:igtrxx:v:12:y:2010:i:03:n:s0219198910002611
    DOI: 10.1142/S0219198910002611
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    References listed on IDEAS

    as
    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, April.
    2. Kazuhiro Ohnishi, 2003. "A Model of a Price‐setting Duopoly with a Wage‐rise Contract," Australian Economic Papers, Wiley Blackwell, vol. 42(2), pages 149-157, June.
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    More about this item

    Keywords

    Most-favored-customer pricing policy; Stackelberg equilibrium; C72; D21; L13;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C0 - Mathematical and Quantitative Methods - - General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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