Roy Chowdhury, Prabal (2006): Firm Size and Pricing Policy.
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We relate the pricing policy of the firms to their size, where firm size is interpreted as the size of the clientele served by the concerned firm. We argue that a firm with a large clientele faces a more severe reputational backlash if it reneges. This allows the firm to effectively commit to its offers, leading to a unique equilibrium without delay, where the firm extracts the whole of the surplus. For smaller firms, however, the reputational effects are much less intense and, consequently, the equilibria involve reneging possibilities. In this case the equilibria are non-unique, and may involve delays as well.
|Item Type:||MPRA Paper|
|Institution:||Indian Statistical Institute, Delhi Center|
|Original Title:||Firm Size and Pricing Policy|
|Keywords:||Firm size; reneging; reputation|
|Subjects:||D - Microeconomics > D4 - Market Structure and Pricing > D40 - General
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C78 - Bargaining Theory; Matching Theory
|Depositing User:||Prabal Roy Chowdhury|
|Date Deposited:||19. Jan 2007|
|Last Modified:||13. Feb 2013 13:57|
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