A Simple Model of Bertrand Duopoly with Noisy Prices

Bogumił Kamiński and Maciej Latek

MPRA Paper from University Library of Munich, Germany

Abstract: We examine a market in which consumers are forced to rely on noisy price signals to select between homogeneous products. The noise originates either from firms' price obfuscation or consumers' bounded information processing capabilities. Standard models and empirical experiments of markets with noise or price obfuscation show that it leads to higher prices detrimental to consumers' welfare. This paper identifies conditions under which an opposite result can be expected. In particular, it shows that a moderate level of noise is beneficial to consumers in a market with a cost leader.

Keywords: noisy pricing; bounded rationality; Bertrand oligopoly; game theory (search for similar items in EconPapers)
JEL-codes: C02 C72 D43 L13 (search for similar items in EconPapers)
Date: 2012-09-14
New Economics Papers: this item is included in nep-com, nep-cta, nep-ind, nep-mic and nep-mkt
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:41333

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