Alternating price competition between firms selling differentiated products to nonhomogeneous consumers can yield two different types of equilibria. One, which we call "disciplined," arises when products are close substitutes. Another, which we call "spontaneous," emerges when products are more differentiated. In disciplined equilibria, an implicit threat to cut price further, in response to an initial price cut, supports quite collusive outcomes, which become less collusive as product differentiation increases. In spontaneous equilibria, no such threat is needed. Consumers in the smaller market tend to pay a higher price, as do consumers served by the more efficient firm. Copyright 1990 by The Econometric Society.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Article provided by Econometric Society in its journal Econometrica.
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Jonathan Eaton & Maxim Engers, 1990.
"Sanctions,"
NBER Working Papers
3399, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions:
Eaton, J. & Engers, M., 1990.
"Sanctions,"
Papers
221, Osaka - Institute of Social and Economic Research.
Eaton, Jonathan & Engers, Maxim, 1992.
"Sanctions,"
Journal of Political Economy,
University of Chicago Press, vol. 100(5), pages 899-928, October.
[Downloadable!] (restricted)