We’re Number 1: Price Wars for Market Share Leadership

I examine the dynamics of oligopolies when firms derive subjective value from market leadership. In equilibrium, prices alternate in tandem between high levels and occasional price wars, which take place when market leadership is at stake. The stationary distribution of market shares is typically multimodal; that is, much of the time, there is a stable market leader. Even though shareholders do not value market leadership per se, a corporate culture that values market leadership may increase shareholder value.

The online appendix is available at https://doi.org/10.1287/mnsc.2017.2725.

This paper was accepted by Bruno Cassiman, business strategy.