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Cyclical price fluctuations caused by information inertia : evidence from the German call-by-call telephone market

Author

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  • Baier, Antje
  • Bolle, Friedel

Abstract

The 2002 prices of suppliers in German call-by-call telephone market are rather dispersed, out-of-phase (uncorrelated), and show systematic down-up movements. In 2004, these prices are less dispersed, more in-phase and show more upwards runs than downs-ups. In both years, we clearly do not observe Edgeworth cycles where prices move in parallel (in-phase). We present a model with demand inertia, caused by incomplete information about prices, where (out-of-phase and in-phase) cycles as well as competitive equilibria and tacit collusion equilibria exist. The transition from the 2002 cycles in the German call-by-call market to more constant prices in 2004 may be due to parameter changes, such as customers possessing improved information.

Suggested Citation

  • Baier, Antje & Bolle, Friedel, 2005. "Cyclical price fluctuations caused by information inertia : evidence from the German call-by-call telephone market," Discussion Papers 225, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
    • Handle: RePEc:zbw:euvwdp:225
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    Cited by:

    1. Okhrin, Irena & Richter, Knut, 2011. "An O(T3) algorithm for the capacitated lot sizing problem with minimum order quantities," European Journal of Operational Research, Elsevier, vol. 211(3), pages 507-514, June.
    2. Okhrin, Irena & Richter, Knut, 2010. "The linear dynamic lot size problem with minimum order quantities," Discussion Papers 283, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.

    More about this item

    Keywords

    Price cycles; incomplete information; telephone market;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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