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Market Sharing and Price Leadership
Stockholm University, Faculty of Social Sciences, The Swedish Institute for Social Research (SOFI).
2009 (English)Report (Other academic)
Abstract [en]

This paper proposes an alternative to the traditional model of supply and demand in markets where consumers take prices as given. Within the framework of “no side payments and partial preplay communication” firms are assumed to decide non-cooperatively on production and marketing while the market price is set by a competitive price leader, i.e. a firm preferring the lowest market price. Predictions include excess supply and a revenuemaximizing market price in markets where production precedes sales. In markets where sales precede production competitive price leadership predicts monopoly pricing but not necessarily monopoly profits if firms are “sufficiently similar”, while the presence of firms with high costs or low capacities will make it possible for the price leader, in some circumstances, to increase its market share and also its profits by reducing its price. And the threat of costly competition for market shares may reduce the market price even for identical firms.

Place, publisher, year, edition, pages
2009. , 34 p.
Swedish Institute for Social Research, ISSN 0283-8222 ; 3/2009
Keyword [en]
Pricing, oligopoly, price leadership, market sharing
National Category
URN: urn:nbn:se:su:diva-26245OAI: diva2:208090
Available from: 2009-03-16 Created: 2009-03-16 Last updated: 2012-02-27Bibliographically approved

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Ante Farm WP 3/2009(182 kB)205 downloads
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File name FULLTEXT01.pdfFile size 182 kBChecksum SHA-512
Type fulltextMimetype application/pdf

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