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Sales technology and price leadership

Version 2 2024-06-18, 01:38
Version 1 2017-07-27, 11:42
journal contribution
posted on 2024-06-18, 01:38 authored by D Datta, J Roy
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.

History

Journal

Manchester school

Volume

76

Pagination

180-195

Location

Chichester, Eng.

ISSN

1463-6786

eISSN

1467-9957

Language

eng

Publication classification

C1.1 Refereed article in a scholarly journal, C Journal article

Copyright notice

2008, The authors

Issue

2

Publisher

Wiley-Blackwell

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