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A Differential Oligopoly Game with Differentiated Goods and Sticky Prices

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Listed author(s):
  • R. Cellini
  • L. Lambertini

Abstract

We investigate a dynamic oligopoly game where goods are differentiated and prices are sticky. We study the open-loop Nash equilibrium, and show that the latter equilibrium entails a larger level of steady state production as compared to the former; both equilibria entail a larger level of production in steady state than in static game. We also study the effects of price stickiness and product differentiation upon the steady state equilibrium allocation. We find that per-firm equilibrium output is increasing in both product differentiation and price stickmess.

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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 440.

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Date of creation: 2002
Handle: RePEc:bol:bodewp:440
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  1. Dockner, Engelbert J. & Gaunersdorfer, Andrea, 2001. "On the profitability of horizontal mergers in industries with dynamic competition," Japan and the World Economy, Elsevier, vol. 13(3), pages 195-216, August.
  2. A. Michael Spence, 1979. "Investment Strategy and Growth in a New Market," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 1-19, Spring.
  3. R. Cellini & L. Lambertini, 2000. "Dynamic Oligopoly with Sticky Prices: Closed-Loop,Feedback and Open-Loop Solutions," Working Papers 393, Dipartimento Scienze Economiche, Universita' di Bologna.
  4. Fershtman, Chaim & Kamien, Morton I, 1990. "Turnpike Properties in a Finite-Horizon Differential Game: Dynamic Duopoly with Sticky Prices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(1), pages 49-60, February.
  5. Tsutsui, Shunichi & Mino, Kazuo, 1990. "Nonlinear strategies in dynamic duopolistic competition with sticky prices," Journal of Economic Theory, Elsevier, vol. 52(1), pages 136-161, October.
  6. Dockner, Engelbert J. & Haug, Alfred A., 1990. "Tariffs and quotas under dynamic duopolistic competition," Journal of International Economics, Elsevier, vol. 29(1-2), pages 147-159, August.
  7. Reynolds, Stanley S, 1987. "Capacity Investment, Preemption and Commitment in an Infinite Horizon Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(1), pages 69-88, February.
  8. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-414, May.
  9. Fershtman, Chaim & Kamien, Morton I, 1987. "Dynamic Duopolistic Competition with Sticky Prices," Econometrica, Econometric Society, vol. 55(5), pages 1151-1164, September.
  10. Driskill, Robert A. & McCafferty, Stephen, 1989. "Dynamic duopoly with adjustment costs: A differential game approach," Journal of Economic Theory, Elsevier, vol. 49(2), pages 324-338, December.
  11. Hassan Benchekroun, 2003. "The closed-loop effect and the profitability of horizontal mergers," Canadian Journal of Economics, Canadian Economics Association, vol. 36(3), pages 546-565, August.
  12. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
  13. Cellini, Roberto & Lambertini, Luca, 1998. "A Dynamic Model of Differentiated Oligopoly with Capital Accumulation," Journal of Economic Theory, Elsevier, vol. 83(1), pages 145-155, November.
  14. Engelbert J. Dockner & Alfred A. Haug, 1991. "The Closed-Loop Motive for Voluntary Export Restraints," Canadian Journal of Economics, Canadian Economics Association, vol. 24(3), pages 679-685, August.
  15. Cellini, Roberto & Lambertini, Luca, 2002. "A differential game approach to investment in product differentiation," Journal of Economic Dynamics and Control, Elsevier, vol. 27(1), pages 51-62, November.
  16. Piga, Claudio A. G., 2000. "Competition in a duopoly with sticky price and advertising," International Journal of Industrial Organization, Elsevier, vol. 18(4), pages 595-614, May.
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Cited by:

  1. Caputo, Michael R. & Ling, Chen, 2013. "The intrinsic comparative dynamics of locally differentiable feedback Nash equilibria of autonomous and exponentially discounted infinite horizon differential games," Journal of Economic Dynamics and Control, Elsevier, vol. 37(10), pages 1982-1994.
  2. Agnieszka Wiszniewska-Matyszkiel & Marek Bodnar & Fryderyk Mirota, 2015. "Dynamic Oligopoly with Sticky Prices: Off-Steady-state Analysis," Dynamic Games and Applications, Springer, vol. 5(4), pages 568-598, December.
  3. Brekke, Kurt Richard & Cellini, Roberto & Siciliani, Luigi & Straume, Odd Rune, 2008. "Competition and quality in regulated markets with sluggish demand," CEPR Discussion Papers 6938, C.E.P.R. Discussion Papers.
  4. L. Lambertini, 2013. "Coordinating Static and Dynamic Supply Chains with Advertising through Two-Part Tariffs," Working Papers wp874, Dipartimento Scienze Economiche, Universita' di Bologna.
  5. Sheng, Li, 2010. "Competing or cooperating to host mega events: A simple model," Economic Modelling, Elsevier, vol. 27(1), pages 375-379, January.

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