Dynamic Price Competition, Learning-by-Doing, and Strategic Buyers

Andrew Sweeting, Dun Jia, Shen Hui and Xinlu Yao

American Economic Review, 2022, vol. 112, issue 4, 1311-33

Abstract: We examine how strategic buyer behavior affects equilibrium outcomes in a model of dynamic price competition where sellers benefit from learning-by-doing by allowing each buyer to expect to capture a share of future buyer surplus. Many equilibria that exist when buyers consider only their immediate payoffs are eliminated when buyers expect to capture even a modest share of future surplus, and the equilibria that survive are those where long-run market competition is more likely to be preserved. Our results are relevant for antitrust policy and our approach may be useful for future analyses of dynamic competition.

JEL-codes: C73 D21 D43 D83 K21 L13 L40 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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DOI: 10.1257/aer.20202016

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