List pricing and discounting in a Bertrand-Edgeworth duopoly

García Díaz, Antón and Hernán-González, Roberto and Kujal, Praveen (2009) List pricing and discounting in a Bertrand-Edgeworth duopoly. International Journal of Industrial Organization, 27 (6). pp. 719-727. ISSN 0167-7187

Full text is not in this repository.

This item is available in: Library Catalogue

Abstract

List, or retail, pricing is a widely used trading institution where firms announce a price that may be discounted at a later stage. Competition authorities view list pricing and discounting as a procompetitive practice. We modify the standard Bertrand–Edgeworth duopoly model to include list pricing and a subsequent discounting stage. Both firms first simultaneously choose a maximum list price and then decide whether to discount, or not, in a subsequent stage. We show that list pricing works as a credible commitment device that induces a pure strategy outcome. This is true for a general class of rationing rules. Further unlike the dominant firm interpretation of a price leader, the low capacity firm may have incentives to commit to a low price and in this sense assume the role of a leader.

Item Type: Article
Research Areas: A. > Business School > Economics
Item ID: 11968
Useful Links:
Depositing User: Users 3197 not found.
Date Deposited: 19 Sep 2013 10:47
Last Modified: 19 Apr 2017 09:45
URI: http://eprints.mdx.ac.uk/id/eprint/11968

Actions (login required)

Edit Item Edit Item