Research output: Contribution to Journal/Magazine › Journal article
Research output: Contribution to Journal/Magazine › Journal article
}
TY - JOUR
T1 - Sales technology and price leadership
AU - Datta, Debabrata
AU - Roy, Jaideep
PY - 2008/3
Y1 - 2008/3
N2 - 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.
AB - 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.
U2 - 10.1111/j.1467-9957.2007.01055.x
DO - 10.1111/j.1467-9957.2007.01055.x
M3 - Journal article
VL - 76
SP - 180
EP - 195
JO - Manchester School
JF - Manchester School
SN - 1463-6786
IS - 2
ER -