- A-Z
- Jena Economic Resea...
- Volume 7
- Endogenous Price Le...
- Abgebildete Person
- Erschienen
- 19. September 2013
- Nummer des Discussion-Papers
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2013-039
- Schlagwort(e)
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bidding
experimental economics
majority voting
Price leadership
- Zusammenfsg.
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We present a model of price leadership on homogeneous product markets where the price leader is selected endogenously. The price leader sets and guarantees a sales price to which followers can adjust according to their individual supply functions. The price leader then clears the market by serving the residual demand. Firms with different marginal costs would induce different prices if they were price leaders. Somewhat counter-intuitively, lower marginal costs of the leader imply higher prices. We compare two mechanisms to determine the price leader in a between-subjects design, majority voting and competitive bidding. The experimental data of later rounds support our theoretical finding that experienced price leaders with lower marginal costs choose higher prices. In the majority voting treatment, participants with higher marginal costs more often establish the lowest cost competitor as price leader in order to induce a higher sales price.
- article pub. typess JER
- Research article
- article languages JER
- Englisch
- JEL-Classification for JER
- D43 - Oligopoly and Other Forms of Market Imperfection ; D74 - Conflict; Conflict Resolution; Alliances ; L11 - Production, Pricing, and Market Structure; Size Distribution of Firms