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Dynamic demand and noncompetitive intertemporal output adjustments: correction and extension

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  • Franz Wirl

    (University of Vienna)

Abstract

While hundreds of papers study the strategic interactions of oligopolists facing sticky prices only very few treat the in my opinion more important and opposite case of sticky or sluggish demand and supply, e.g., for energy. This point was taken up in Wirl (Int J Ind Organ 28:220–229, 2010) but unfortunately, the computation of the linear Markov perfect equilibrium is wrong. The situation in energy markets following Russia’s invasion of Ukraine adds a topical element to the theoretical analysis. Application to the oil market suggests that the difference between collusion and oligopolistic competition among few (symmetric) players is small for Markov perfect linear eqilibria. This is in stark contrast to the outcome in open loop strategies.

Suggested Citation

  • Franz Wirl, 2024. "Dynamic demand and noncompetitive intertemporal output adjustments: correction and extension," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 32(2), pages 483-505, June.
    • Handle: RePEc:spr:cejnor:v:32:y:2024:i:2:d:10.1007_s10100-023-00860-6
    DOI: 10.1007/s10100-023-00860-6
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    More about this item

    Keywords

    Dynamic demand; Costly output adjustments; Differential game; Multiple linear Markov perfect equilibria;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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