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Dynamic Price Competition

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Abstract

We consider the model of price competition for a single buyer among many sellers in a dynamic environment. The surplus from each trade is allowed to depend on the path of previous purchases, and as a result, the model captures phenomena such as learning by doing and habit formation in consumption characterize Markovian equilibria for finite and infinite horizon versions of the model and show that the stationary infinite horizon version of the model possesses an equilibrium where all the sellers receive an equilibrium payoff equal to their marginal contribution to the social welfare.

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File URL: http://cowles.econ.yale.edu/P/cd/d14a/d1412.pdf
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Bibliographic Info

Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1412.

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Length: 45 pages
Date of creation: Apr 2003
Date of revision:
Publication status: Published in Journal of Economic Theory (2006), 127: 232-263
Handle: RePEc:cwl:cwldpp:1412

Note: CFP 1174
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Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.econ.yale.edu/
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

Related research

Keywords: Dynamic competition; Marginal contribution; Markov perfect equilibrium; Common agency;

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References

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  1. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
  2. Dirk Bergemann & Juuso Valimaki, 1996. "Learning and Strategic Pricing," Cowles Foundation Discussion Papers 1113, Cowles Foundation for Research in Economics, Yale University.
  3. Dirk & Juuso Valimaki, 1998. "Dynamic Common Agency," Cowles Foundation Discussion Papers 1206, Cowles Foundation for Research in Economics, Yale University.
  4. Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 1-31, February.
  5. Eric Maskin & Jean Tirole, 1997. "Markov Perfect Equilibrium, I: Observable Actions," Harvard Institute of Economic Research Working Papers 1799, Harvard - Institute of Economic Research.
  6. Drew Fudenberg & David K. Levine, 1983. "Subgame-Perfect Equilibria of Finite- and Infinite-Horizon Games," Levine's Working Paper Archive 219, David K. Levine.
  7. Miller, Robert A, 1984. "Job Matching and Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1086-120, December.
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Citations

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Cited by:
  1. Chen, Yuxin & Zhang, Z. John, 2009. "Dynamic targeted pricing with strategic consumers," International Journal of Industrial Organization, Elsevier, vol. 27(1), pages 43-50, January.
  2. Hackl, Franz & Kummer, Michael E. & Winter-Ebmer, Rudolf & Zulehner, Christine, 2014. "Market structure and market performance in E-commerce," European Economic Review, Elsevier, vol. 68(C), pages 199-218.
  3. Carlos J.Pérez & Carlos J.Ponce, 2013. "Disruption costs and the choice of technology," ILADES-Georgetown University Working Papers inv292, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.

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