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Price dynamics in a two-period reputation model

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  • Dragan Filipovich

    (El Colegio de México)

Abstract

This paper looks at the time-path of prices in a two-period modified version of the reputation model of Milgrom and Roberts(10) in which a non-standard price signalling stage game is substituted for the entry-deterrence game those authors work with. It shows that prices may rise or fall from one period to the next. Also, it shows that “bonding’’ is not possible in this environment.

Suggested Citation

  • Dragan Filipovich, 2001. "Price dynamics in a two-period reputation model," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 16(2), pages 185-201.
  • Handle: RePEc:emx:esteco:v:16:y:2001:i:2:p:185-201
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    File URL: http://estudioseconomicos.colmex.mx/archivo/EstudiosEconomicos2001/185-201.pdf
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    References listed on IDEAS

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    1. Kreps, David M & Wilson, Robert, 1982. "Sequential Equilibria," Econometrica, Econometric Society, vol. 50(4), pages 863-894, July.
    2. Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August.
    3. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August.
    4. Mark N. Hertzendorf, 1993. "I'm Not a High-Quality Firm -- But I Play One on TV," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 236-247, Summer.
    5. Banks, Jeffrey S & Sobel, Joel, 1987. "Equilibrium Selection in Signaling Games," Econometrica, Econometric Society, vol. 55(3), pages 647-661, May.
    6. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-641, August.
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