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- Title
SALES TECHNOLOGY AND PRICE LEADERSHIP.
- Authors
DATTA, DEBABRATA; ROY, JAIDEEP
- 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.
- Subjects
BUSINESS enterprises; TARIFF; VALUATION; NONLINEAR statistical models; TECHNOLOGY; ECONOMIC competition; REVENUE; MARKET leaders; DEBT-to-equity ratio
- Publication
Manchester School (1463-6786), 2008, Vol 76, Issue 2, p180
- ISSN
1463-6786
- Publication type
Article
- DOI
10.1111/j.1467-9957.2007.01055.x