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Dynamic price competition

Dynamic price competition
Dynamic price competition
We consider the model of price competition for a single buyer among many sellers in a dynamic environment. The surplus from each trade is allowed to depend on the path of previous purchases, and as a result, the model captures phenomena such as learning by doing and habit formation in consumption.
We characterize Markovian equilibria for finite and infinite horizon versions of the model and show that the stationary infinite horizon version of the model possesses an efficient equilibrium where all the sellers receive an equilibrium payoff equal to their marginal contribution to the social welfare.
dynamic competition, marginal contribution, Markov perfect equilibrium, common agency
0022-0531
232-263
Bergemann, Dirk
436929ea-1d3f-48d5-bf4f-08ef4a2d74b4
Välimäki, Juuso
d9473b09-7596-44dd-ab49-6904c9585e69
Bergemann, Dirk
436929ea-1d3f-48d5-bf4f-08ef4a2d74b4
Välimäki, Juuso
d9473b09-7596-44dd-ab49-6904c9585e69

Bergemann, Dirk and Välimäki, Juuso (2006) Dynamic price competition. Journal of Economic Theory, 127 (1), 232-263. (doi:10.1016/j.jet.2005.01.002).

Record type: Article

Abstract

We consider the model of price competition for a single buyer among many sellers in a dynamic environment. The surplus from each trade is allowed to depend on the path of previous purchases, and as a result, the model captures phenomena such as learning by doing and habit formation in consumption.
We characterize Markovian equilibria for finite and infinite horizon versions of the model and show that the stationary infinite horizon version of the model possesses an efficient equilibrium where all the sellers receive an equilibrium payoff equal to their marginal contribution to the social welfare.

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More information

Published date: 2006
Keywords: dynamic competition, marginal contribution, Markov perfect equilibrium, common agency

Identifiers

Local EPrints ID: 39674
URI: http://eprints.soton.ac.uk/id/eprint/39674
DOI: doi:10.1016/j.jet.2005.01.002
ISSN: 0022-0531
PURE UUID: 5135508e-843d-4fad-9b01-46f1e98ca83b

Catalogue record

Date deposited: 11 Jul 2006
Last modified: 15 Mar 2024 08:16

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Contributors

Author: Dirk Bergemann
Author: Juuso Välimäki

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