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Dynamic Price Competition

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  • Dirk Bergemann

    () (Yale University, Faculty of Arts & Sciences, Department of Economics (Box 8268))

  • Juuso Valimaki

    () (Helsinki School of Economics & Business Administration)

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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Bibliographic Info

Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm360.

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Date of creation: 28 Jul 2004
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Handle: RePEc:ysm:somwrk:ysm360

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Web page: http://icf.som.yale.edu/
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Related research

Keywords: Dynamic Competition; Marginal Contribution; Markov Perfect Equilibrium; Common Agency;

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References

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  1. Fudenberg, Drew & Levine, David, 1983. "Subgame-perfect equilibria of finite- and infinite-horizon games," Journal of Economic Theory, Elsevier, vol. 31(2), pages 251-268, December.
  2. 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.
  3. Bergemann, Dirk & Valimaki, Juuso, 1996. "Learning and Strategic Pricing," Econometrica, Econometric Society, vol. 64(5), pages 1125-49, September.
  4. Dirk & Juuso Valimaki, 1998. "Dynamic Common Agency," Cowles Foundation Discussion Papers 1206, Cowles Foundation for Research in Economics, Yale University.
  5. Miller, Robert A, 1984. "Job Matching and Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1086-120, December.
  6. 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.
  7. Eric Maskin & Jean Tirole, 1997. "Markov Perfect Equilibrium, I: Observable Actions," Harvard Institute of Economic Research Working Papers 1799, Harvard - Institute of Economic Research.
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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.

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