List pricing and discounting in a Bertrand-Edgeworth duopoly
García Díaz, Antón, Hernán-González, Roberto and Kujal, Praveen ORCID: https://orcid.org/0000-0002-2917-9724
(2009)
List pricing and discounting in a Bertrand-Edgeworth duopoly.
International Journal of Industrial Organization, 27
(6)
.
pp. 719-727.
ISSN 0167-7187
[Article]
(doi:10.1016/j.ijindorg.2009.03.002)
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 |
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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: | https://eprints.mdx.ac.uk/id/eprint/11968 |
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