Dynamic Duopoly With Learning Through Market Experimentation
AbstractThis paper analyzes how learning behaviors can substantially modify the outcome of competition in an oligopolistic industry facing demand uncertainty. We consider the case of a symmetric duopoly game where firms have imperfect information about market demand and learn through observing the volume of their sales. The main body of the paper consists in showing how market experimentation can explain the existence of price-dispersion in an oligopolistic industry. We study this phenomenon and its dynamic evolution in the context of an Hotelling duopoly model; we then extend the analysis to general demand functions and to N-firm oligopolies. We discuss some implications of the public good aspect of information about market demand. We then conclude with a few comments on what happens when the value of information in the oligopolistic industry is negative.
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Bibliographic InfoPaper provided by DELTA (Ecole normale supérieure) in its series DELTA Working Papers with number 90-13.
Length: 45 pages
Date of creation: 1990
Date of revision:
Publication status: Published in Economic Theory, 1993
competition ; monopolies ; demand ; economic models ; information;
Other versions of this item:
- Aghion, Philippe & Espinosa, Maria Paz & Jullien, Bruno, 1993. "Dynamic Duopoly with Learning through Market Experimentation," Economic Theory, Springer, vol. 3(3), pages 517-39, July.
- Jullien Bruno & Aghion Philippe & Paz Espinoza M, 1990. "Dynamic duopoly with learning through market experimentation," CEPREMAP Working Papers (Couverture Orange) 9012, CEPREMAP.
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