Market Sharing And Price Leadership
Source: Stockholm University
This paper proposes an alternative to the traditional model of supply and demand in markets where consumers take prices as given. Within the framework of "No side payments and partial preplay communication" firms are assumed to decide non-cooperatively on production and marketing while the market price is set by a competitive price leader, i.e. a firm preferring the lowest market price. Predictions include excess supply and a revenue-maximizing market price in markets where production precedes sales.