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Introductory Price as a Signal of Cost in a Model of Repeat Business

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  • Bagwell, Kyle

Abstract

This paper analyzes a bargaining model with incomplete information in which the time between offers is an endogenous stra tegic variable. It finds equilibria involving a delay to agreement th at is attributable to the use of strategic time delay by bargainers t o signal their relative strength. Under some specifications of the pa rameters, delay is present in the unique sequential equilibrium whose beliefs satisfy one intuitive restriction. This delay does not vanis h as the minimal time between offers becomes small. Copyright 1987 by The Review of Economic Studies Limited.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of Economic Studies.

Volume (Year): 54 (1987)
Issue (Month): 3 (July)
Pages: 365-84

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Handle: RePEc:bla:restud:v:54:y:1987:i:3:p:365-84

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  1. Kyle Bagwell, 1987. "Introductory Price as a Signal of Cost in a Model of Repeat Business," Discussion Papers 722, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
  3. Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-61, October.
  4. David M Kreps & Robert Wilson, 2003. "Sequential Equilibria," Levine's Working Paper Archive 618897000000000813, David K. Levine.
  5. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
  6. Irvine, F Owen, Jr, 1981. "An Optimal Middleman Firm Price Adjustment Policy: The "Short-Run Inventory-Based Pricing Policy."," Economic Inquiry, Western Economic Association International, vol. 19(2), pages 245-69, April.
  7. Sobel, Joel, 1984. "The Timing of Sales," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 353-68, July.
  8. Kyle Bagwell, 1986. "Informational Product Differentiation as a Barrier to Entry," Discussion Papers 711, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Shilony, Yuval, 1977. "Mixed pricing in oligopoly," Journal of Economic Theory, Elsevier, vol. 14(2), pages 373-388, April.
  10. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
  11. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
  12. Conlisk, John & Gerstner, Eitan & Sobel, Joel, 1984. "Cyclic Pricing by a Durable Goods Monopolist," The Quarterly Journal of Economics, MIT Press, vol. 99(3), pages 489-505, August.
  13. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August.
  14. Salop, Steven, 1977. "The Noisy Monopolist: Imperfect Information, Price Dispersion and Price Discrimination," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 393-406, October.
  15. Kyle Bagwell & Garey Ramey, 1987. "Advertising and Limit Pricing," Discussion Papers 729, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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