Patterns of Competitive Interaction
Mark Armstrong and
John Vickers
MPRA Paper from University Library of Munich, Germany
Abstract:
We explore patterns of price competition in an oligopoly where consumers vary in the set of firms they consider for their purchase and buy from the lowest-priced firm they consider. We study a pattern of consideration, termed "symmetric interactions", that generalises models used in existing work (duopoly, symmetric firms, and firms with independent reach). Within this class, equilibrium profits are proportional to a firm's reach, firms with a larger reach set higher average prices, and a reduction in the number of firms (either by exit or by merger) harms consumers. However, increased competition (either by entry of by increased consumer awareness) does not always benefit consumers. We go on to study patterns of consideration with asymmetric interactions. In situations with disjoint reach and with nested reach we find equilibria in which price competition is "duopolistic": only two firms compete within each price range. We characterize the contrasting equilibrium patterns of price competition for all patterns of consideration in the three-firm case.
Keywords: Price competition; consideration sets; price dispersion; entry and merger. (search for similar items in EconPapers)
JEL-codes: C72 D43 D83 L13 L4 (search for similar items in EconPapers)
Date: 2021-05
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind, nep-mic and nep-ore
References: Add references at CitEc
Citations:
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/108398/1/MPRA_paper_108398.pdf original version (application/pdf)
Related works:
Journal Article: Patterns of Competitive Interaction (2022)
Working Paper: Patterns of Competitive Interaction (2021)
Working Paper: Patterns of competitive interaction (2020)
Working Paper: Patterns of Competitive Interaction (2019)
Working Paper: Patterns of Competitive Interaction (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:108398
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter (winter@lmu.de).