Myopic oligopoly pricing

Iwan Bos, Marco Marini and Riccardo D. Saulle

Games and Economic Behavior, 2024, vol. 145, issue C, 377-412

Abstract: This paper examines capacity-constrained oligopoly pricing with sellers who seek myopic 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 mixed-strategy 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; Edgeworth price cycles; 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: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0899825624000459
Full text for ScienceDirect subscribers only

Related works:
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)
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:eee:gamebe:v:145:y:2024:i:c:p:377-412

DOI: 10.1016/j.geb.2024.03.014

Access Statistics for this article

Games and Economic Behavior is currently edited by E. Kalai

More articles in Games and Economic Behavior from Elsevier
Bibliographic data for series maintained by Catherine Liu ().