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Edgeworth Cycles and Focal Prices: Computational Dynamic Markov Equilibria

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  • Noel, Michael D.

Abstract

Motivated by the discovery of apparent Edgeworth Cycles in many retail gasoline markets, this paper extends the Maskin & Tirole [1988] theory Edgeworth Cycles to a wide range of more complicated and realistic settings. Taking a computational approach to search for Markov Perfect Equilibria, I examine models involving duopoly and triopoly, differentiation, capacity constraints, and different sharing rules, discount factors and initial beliefs about price leading behavior. I find Edgeworth Cycles equilibrium in many scenarios outside the homogenous-good Bertrand mold. Cycle characteristics and average markups depend on the scenario.

Suggested Citation

  • Noel, Michael D., 2004. "Edgeworth Cycles and Focal Prices: Computational Dynamic Markov Equilibria," University of California at San Diego, Economics Working Paper Series qt59t3g818, Department of Economics, UC San Diego.
    • Handle: RePEc:cdl:ucsdec:qt59t3g818
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    References listed on IDEAS

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    Cited by:

    1. Michael D. Noel, 2007. "Edgeworth Price Cycles: Evidence From The Toronto Retail Gasoline Market," Journal of Industrial Economics, Wiley Blackwell, vol. 55(1), pages 69-92, March.
    2. Laurent Reynald-Alexandre, 2006. "Differentiated duopoly with 'elimination by aspects'," Working Papers halshs-00590488, HAL.

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    More about this item

    Keywords

    D43; L11; L13;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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