Home > Research > Publications & Outputs > Sales technology and price leadership
View graph of relations

Sales technology and price leadership

Research output: Contribution to Journal/MagazineJournal article

Published
  • Debabrata Datta
  • Jaideep Roy
Close
<mark>Journal publication date</mark>03/2008
<mark>Journal</mark>Manchester School
Issue number2
Volume76
Number of pages16
Pages (from-to)180-195
Publication StatusPublished
<mark>Original language</mark>English

Abstract

Two firms sell a homogeneous product to two buyers who differ significantly in their valuation of the good and are allowed to charge (possibly) multiple two-part tariffs. Firms decide upon optimal prices and the choice of sales technologies which help acquire revenues from nonlinear prices. There is a subgame-perfect equilibrium where firms choose different sales technologies and the firm with an advanced sales technology emerges to be a price leader, charging a two-part tariff and selling only to the low-valuation buyers. Consequently, the firm with the less advanced sales technology follows, charges only a fixed fee and serves the high-valuation buyers and always earns strictly higher profits than its leader. Social surplus may deteriorate with competition.