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Sales technology and price leadership

Datta, Debabrata and Roy, Jaideep (2008) Sales technology and price leadership. Manchester School, 76 (2). pp. 180-195. ISSN 1463-6786

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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.

Item Type: Article
Journal or Publication Title: Manchester School
Subjects:
Departments: Lancaster University Management School > Economics
ID Code: 44822
Deposited By: ep_importer_pure
Deposited On: 11 Jul 2011 19:22
Refereed?: No
Published?: Published
Last Modified: 26 Nov 2014 13:59
Identification Number:
URI: http://eprints.lancs.ac.uk/id/eprint/44822

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