'Be Nice Unless it Pays to Fight': A New Theory of Price Determination with Implications for Competition Policy
AbstractThis paper introduces a simple extensive form pricing game.The Bertrand outcome is a Nash equilibrium outcome in this game, but it is not necessarily subgame perfect.The subgame perfect equilibrium outcome features the following comparative static properties.The more similar firms are, the higher the equilibrium price.Further, a new firm that enters the industry or an existing firm that becomes more efficient can raise the equilibrium price.The subgame perfect equilibrium is used to formalize price leadership, joint dominance and efficiency o¤ence.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2002-23.
Date of creation: 2002
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game theory; mergers; Nash equilibrium; price competition;
Other versions of this item:
- Boone, J., 2003. "'Be nice, unless it pays to fight': A new theory of price determination with implications for competition policy," Discussion Paper 2003-011, Tilburg University, Tilburg Law and Economic Center.
- Jan Boone, 2002. "’Be nice, unless it pays to fight’: A New Theory of Price Determination with Implications for Competition Policy," CIG Working Papers FS IV 02-18, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
- Boone, Jan, 2002. "'Be Nice, Unless it Pays to Fight': A New Theory of Price Determination with Implications for Competition Policy," CEPR Discussion Papers 3342, C.E.P.R. Discussion Papers.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
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