Open AccessBook
Collusive price leadership
Julio J. Rotemberg,Garth Saloner +1 more
TLDR
In this article, the authors study the pattern of pricing in which price changes are first announced by one firm and then matched by its rivals, and they show that the follower can benefit from price rigidity so that prices may be changed infrequently.Abstract:
The authors study the pattern of pricing in which price changes are first announced by one firm and then matched by its rivals. In their model, this price leadership facilitates collusion under asymmetric information. In equilibrium, the leader earns higher profits than the follower. Nonetheless, if information is sufficiently asymmetric, the less informed firm prefers to follow the better-informed firm, so the leader can emerge endogenously. The authors show that the follower can benefit from price rigidity so that prices may be changed infrequently. They also show that overall welfare may be lower under collusive price leadership than under overt collusion. Copyright 1990 by Blackwell Publishing Ltd.read more
Citations
More filters
Journal ArticleDOI
Multimarket Contact and Price Coordination in the Cellular Telephone Industry
TL;DR: In this paper, the authors identify a method of pricing in the cellular telephone industry that seems to enable firms to coordinate their actions across markets, and this pricing pattern is found to raise prices by approximately 7-10%.
Book
Information exchanges among firms and their impact on competition
Kai-Uwe Kühn,Xavier Vives +1 more
Journal ArticleDOI
Reward-Based Crowdfunding Campaigns: Informational Value and Access to Venture Capital
TL;DR: This study suggests that the entrepreneur might forgo the opportunity of acquiring information via crowdfunding because the benefits of crowdfunding are insufficient to offset the risk of campaign failure.
Journal ArticleDOI
Price leadership and coordination in retail gasoline markets with price cycles
TL;DR: In this paper, the authors examine the coordination mechanism used by gasoline stations in the midwestern United States where prices exhibit highly cyclical fluctuations known as Edgeworth cycles, and find that a particular retail chain in each city acts as a price leader initiating each price restoration.
Posted Content
Equilibrium Vertical Foreclosure: Reply
TL;DR: Ordover and Saloner as discussed by the authors showed that a downstream duopolist may have an incentive to backward integrate in order to foreclose its downstream rival from a source of upstream supply, and that in equilibrium, the foreclosed downstream rival does not find it profitable to negate these effects by integrating itself.
References
More filters
Journal ArticleDOI
A Non-cooperative Equilibrium for Supergames
TL;DR: In this paper, a non-cooperative equilibrium concept for super games is presented, which fits John Nash's noncooperative solution and also has some features resembling the Nash cooperative solution.
Journal ArticleDOI
On the Stability of Collusive Price Leadership
TL;DR: In this article, the authors investigate the gains from cartel formation and the stability of a dominant cartel for the price-leadership model and show that there is a general interest in the establishment of a cartel with the competitive fringe reaping a disproportionate share of the benefits.
Journal ArticleDOI
Some uses of the expenditure function in public finance
Peter A. Diamond,Daniel McFadden +1 more
Journal ArticleDOI
The Kinky Oligopoly Demand Curve and Rigid Prices
TL;DR: The authors examined the degree of correspondence between the pure theory of the kinky demand curve and the observed price patterns in oligopolistic industries and concluded that the theory is an ingenious rationalization of the price rigidities that were reported in many statistical studies of prices during the thirties.