Spacial Equilibrium in a State Space Approach to Demand Uncertainty
Firms are likely to be uncertain about consumer preferences when launching products. The existing literature models preference uncertainty as an additive shock to the consumer distribution in a characteristic space model. The additive shock only shifts the mean of the consumers' ideal points. We generalize this approach to a state space model in which a vector of parameters can give rise to di erent distributions of consumer tastes in di erent states, allowing other moments of the consumer density to be uncertain. An equilibrium existence result is given. In the case of symmetric distributions, the unique subgame-perfect equilibrium can be described by a simple closed-form solution.
|Date of creation:||Jun 2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Fax: +61)-2- 9313- 6337
Web page: http://www.economics.unsw.edu.au/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:swe:wpaper:2007-19. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gabriele Gratton)
If references are entirely missing, you can add them using this form.