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.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
