Dynamic Price Adjustment Under Imperfect Competition

Curtis Eberwein and Ted To
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Curtis Eberwein: McGill University

Industrial Organization from EconWPA

Abstract: 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.

Keywords: dynamic pricing; oligopoly; overlapping generations (search for similar items in EconPapers)
JEL-codes: C73 D21 D43 (search for similar items in EconPapers)
Date: 1998-03-16
Note: Type of Document - Tex generated DVI file; prepared on IBM PC - mikTeX; to print on any; pages: 26 ; figures: none
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Related works:
Working Paper: Dynamic Price Adjustment Under Imperfect Competition (1998)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpio:9803002

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