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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