Myopic Oligopoly Pricing

Iwan Bos, Marco Marini and Riccardo Saulle

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines capacity-constrained oligopoly pricing with sellers who seekmyopic improvements. We employ the Myopic Stable Set solution concept and establish the existence of a unique pure-strategy price solution for any given level of capacity. This solution is shown to coincide with the set of pure-strategy Nash equilibria when capacities are large or small. For an intermediate range of capacities, it predicts a price interval that includes the mixedstrategy support. This stability concept thus encompasses all Nash equilibria and offers a pure-strategy solution when there is none in Nash terms. It particularly provides a behavioral rationale for different pricing patterns, including Edgeworth price cycles and states of hyper-competition with supply shortages. We also analyze the impact of a change in firm size distribution. A merger among the biggest firms may lead to more price dispersion as it increases the maximum and decreases the minimum myopically stable price.

Keywords: Bounded Rationality; Capacity Constraints; Mergers; Myopic Stable Set; Oligopoly Pricing; Supply Shortages (search for similar items in EconPapers)
JEL-codes: C72 D43 L13 (search for similar items in EconPapers)
Date: 2021-12-16
New Economics Papers: this item is included in nep-com, nep-cwa, nep-gth, nep-ore and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/111176/1/MPRA_paper_111175.pdf original version (application/pdf)

Related works:
Journal Article: Myopic oligopoly pricing (2024)
Working Paper: Myopic Oligopoly Pricing (2021)
Working Paper: Myopic Oligopoly Pricing (2021)
Working Paper: Myopic Oligopoly Pricing (2021)
Working Paper: Myopic Oligopoly Pricing (2021)
Working Paper: Myopic Oligopoly Pricing (2021)
Working Paper: Myopic Oligopoly Pricing (2021)
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:111176

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 ().