Price Leadership and Firm Size Asymmetry: An Experimental Analysis∗
نویسندگان
چکیده
We use laboratory experiments to examine the effect of firm size asymmetry on price leadership in a capacity constrained duopoly. The unique subgame perfect equilibrium of our duopoly game predicts that the large firm is the price leader. In the experiment, although price leadership by the large firm is frequently observed, behavior deviates significantly from the model’s prediction. Both small and large firms display a strong tendency to wait to announce their price. Consequently, simultaneous price setting is frequent. Finally, we observe higher prices when price setting is sequential rather than simultaneous and when firm size asymmetry is high. J.E.L. codes: L11, L13, C91
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