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Long Run Price Dynamics in Oligopoly

Author

Listed:
  • Renault, R.

Abstract

It is shown that a fixed cost of nominal price changes enhances the ability of firms to collude in an ologopolistic market for a homogeneous good. Nevertheless, harsh price competition with firms making no profit remains a possible outcome. The analysis focuses on stable symmetric steady states that can be sustained if firms use strategies that depend only on the previous period price. The collusive outcome under inflation is characterized and the resulting price dynamics is compared to that of an equilibrium in which firms earn zero profit.

Suggested Citation

  • Renault, R., 1997. "Long Run Price Dynamics in Oligopoly," Papers 97.482, Toulouse - GREMAQ.
    • Handle: RePEc:fth:gremaq:97.482
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    More about this item

    Keywords

    OLIGOPOLIES ; PRICES;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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