Dynamic Oligopoly Pricing with Asymmetric Information: Implications for Horizontal Mergers

Andrew Sweeting, Xuezhen Tao and Xinlu Yao

American Economic Journal: Microeconomics, 2024, vol. 16, issue 3, 345-73

Abstract: We model repeated pricing by differentiated product firms when each firm has private information about its serially correlated marginal cost. In a fully separating equilibrium of the dynamic game, signaling incentives can lead equilibrium prices to be significantly above those in a static, complete information game, even when the possible variation in the privately observed state variables is very limited. We calibrate our model using data from the beer industry and show that, without any change in conduct, our model can explain increases in price levels and changes in price dynamics and cost pass-through after the 2008 MillerCoors joint venture.

JEL-codes: C73 D43 D82 G34 L24 L41 L66 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1257/mic.20220051

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