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Dynamic Price Adjustment Under Imperfect Competition

  • Curtis Eberwein

    (McGill University)

  • Ted To

    (University of Warwick)

Registered author(s):

We study dynamic price adjustment under imperfect competition when consumers have non-time-separable preferences. In our model an intertemporal link arises in the consumers' maximization problems because current consumption decisions affect the utility of future consumption. Thus future demand depends on the current price and firms must take this into account when making their decisions. The main result is that equilibrium prices follow a dynamic stochastic process in which the current price depends on past prices and on random disturbances. The convergence of prices to the `long run expected price' is monotonic if current and future consumption are substitutes and oscillatory if they are complements.

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Paper provided by EconWPA in its series Industrial Organization with number 9803002.

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Length: 26 pages
Date of creation: 16 Mar 1998
Date of revision:
Handle: RePEc:wpa:wuwpio:9803002
Note: Type of Document - Tex generated DVI file; prepared on IBM PC - mikTeX; to print on any; pages: 26 ; figures: none
Contact details of provider: Web page: http://128.118.178.162

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  19. Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-32, April.
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  26. Bils, Mark, 1989. "Pricing in a Customer Market," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 699-718, November.
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