Ivan Pastine and Tuvana Pastine
"Cost of delay and endogenous price leadership
JEL codes: L10
Keywords: endogenous timing, price leadership, war of attrition
Abstract: We study the effects of discounting in a standard endogenous price leadership model. We show that there will be occasional changes in the identity of the leader with any cost of delay or discounting, however small. By analyzing the incentives that induce a firm to take up the leader position we derive positive predictions about which firm will lead most price changes. Firms with shorter reaction times will be more likely to become the price leader, as will firms with lower cost of delay if the firmsí reaction times are similar.