Bilateral Most-Favored-Customer Pricing and Collusion

  title={Bilateral Most-Favored-Customer Pricing and Collusion},
  author={William S. Neilson and Harold Winter},
  journal={The RAND Journal of Economics},
In a two-period differentiated products duopoly model, most-favored-customer (MFC) pricing policies allow firms to commit to prices above the Bertrand prices. It is shown here, however, that unless a restrictive and unappealing assumption is made about demand, there is no equilibrium in which both firms adopt MFC policies. The restrictive assumption is that at least one firm's demand is more responsive to changes in its opponent's price than to changes in its own price; otherwise, firms have an… Expand
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