Working Paper: CEPR ID: DP3054
Authors: Ivan Pastine; Tuvana Pastine
Abstract: This Paper analyses endogenous price leadership in a duopolistic market with differentiated products and symmetrically informed firms. We study the effects of deadlines and discounting in a standard endogenous leadership model. We show that there will be occasional changes in the identity of the price leader with any cost of delay or discounting, however small. By analyzing the incentives that induce a firm to take up the leader position we derive positive predictions about which firm will lead most price changes.
Keywords: endogenous timing; price leadership; war of attrition
JEL Codes: L13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| cost of delay (H43) | price leadership dynamics (L11) |
| cost of delay (H43) | mixed-strategy equilibrium (C73) |
| cost of delay (H43) | pure strategy Nash equilibrium (C72) |
| price leader identity changes (D43) | strategic incentives (L21) |
| cost of delay (H43) | simultaneous price announcements (D49) |
| follower-leader profit ratio (D33) | likelihood of leading price changes (E30) |
| brand loyalty and discount rates (L42) | follower-leader profit ratio (D33) |