Bergemann, Dirk and Valimaki, Juuso
Strategic buyers and privately observed prices.
Journal of Economic Theory, 105, (2), . (doi:10.1006/jeth.2001.2891).
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A model of finitely repeated price competition between two sellers with differentiated goods and a large buyer is analyzed. The set of pure strategy sequential equilibria is investigated under public and private monitoring. With private monitoring, i.e., when prices are not observable to the competing sellers, all sales are made by the better seller and the set of repeated game equilibrium payoffs coincides with the stage game subgame perfect equilibrium payoffs. This is in sharp contrast to the game with perfect monitoring where the folk theorem obtains. Journal of Economic Literature Classification Numbers: C72, D43.
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