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Limits of price competition: cost asymmetry and imperfect information

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  • Sneha Bakshi

    (Independent Researcher)

Abstract

In a class of asymmetric-cost duopoly price competition games, price-elastic individual demand reveals a threshold of informed buyers below which equilibrium is in monopoly prices. Even if the threshold is met, unless all buyers are informed, monopoly prices are listed and are more likely between less alike sellers. An increase in the efficient seller’s cost weakly reduces its rival’s price (in a first order stochastic dominated sense) without disturbing its profit. Lastly, increasing the number of sellers increases competitive pricing incentives.

Suggested Citation

  • Sneha Bakshi, 2020. "Limits of price competition: cost asymmetry and imperfect information," International Journal of Game Theory, Springer;Game Theory Society, vol. 49(4), pages 913-932, December.
    • Handle: RePEc:spr:jogath:v:49:y:2020:i:4:d:10.1007_s00182-020-00717-1
    DOI: 10.1007/s00182-020-00717-1
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    More about this item

    Keywords

    Uninformed buyers; Monopoly prices; Asymmetric costs; Price competition;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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