A simple spatial model for Edgeworth Cycles
Maskin and Tirole (1998) formalise Edgeworth's (1925) model of a dynamic equilibrium between two players where prices increase sharply and decrease slowly; the Edgeworth Cycle. Here, we present an application of the model, showing how Edgeworth Cycles might arise in a marketplace where spatial competition is important. We illustrate the approach using the example of retail gasoline markets where Edgeworth Cycles have been widely observed.
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- Doyle, Joseph & Muehlegger, Erich & Samphantharak, Krislert, 2010.
"Edgeworth cycles revisited,"
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- Michael D. Noel, 2007. "Edgeworth Price Cycles, Cost-Based Pricing, and Sticky Pricing in Retail Gasoline Markets," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 324-334, May.
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