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Habit formation and oligopolistic competition

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  • Alejandro Tatsuo Moreno-Okuno

    (Universidad de Guanajuato)

Abstract

In this paper I analyze competition in markets with habit formation. I model a two-period game in which two firms enter a market sequentially. I find that the second firm's product is similar to the original one, but not exactly the same. The model also applies to competition in different markets that share a characteristic; for example, sweetness is a common characteristic of carbonated soft drinks and ice-cream, and consumption of a product in one market affects the preferences for products in the other market. I find that new firms produce products with similar characteristics not only to a product that has entered the same market, but to products that have entered other markets with common characteristics.

Suggested Citation

  • Alejandro Tatsuo Moreno-Okuno, 2012. "Habit formation and oligopolistic competition," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 27(2), pages 379-400.
    • Handle: RePEc:emx:esteco:v:27:y:2012:i:2:p:379-400
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    File URL: https://estudioseconomicos.colmex.mx/index.php/economicos/article/view/87/89
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    References listed on IDEAS

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    1. Alejandro Tatsuo Moreno Okuno, 2010. "Price competition in mixed strategies in markets with habit formation," EconoQuantum, Revista de Economia y Finanzas, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 7(1), pages 67-93, Julio - D.
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    Cited by:

    1. Alejandro Tatsuo Moreno Okuno, 2010. "Price competition in mixed strategies in markets with habit formationPrice competition in mixed strategies in markets with habit formation," EconoQuantum, Revista de Economia y Negocios, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 7(1), pages 69-95, Julio - D.
    2. Alejandro Tatsuo Moreno Okuno, 2010. "Price competition in mixed strategies in markets with habit formation," EconoQuantum, Revista de Economia y Finanzas, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 7(1), pages 67-93, Julio - D.

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      More about this item

      Keywords

      habit formation; product differentiation; oligopolistic competition;
      All these keywords.

      JEL classification:

      • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
      • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
      • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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