Competitive dynamic pricing with alternating offers: Theory and experiment

Vincent Mak, Amnon Rapoport and Eyran J. Gisches

Games and Economic Behavior, 2012, vol. 75, issue 1, 250-264

Abstract: We propose an equilibrium model of duopolistic dynamic pricing in which a buyer alternates between two sellers for price offers over a finite time horizon. The game ends when the buyer accepts a price offer or the selling season is over, whichever comes first. Previous research (Granot et al., 2007) shows that there are successive markdowns in equilibrium when the buyer is commonly known to be myopic; our analysis suggests that when she is known to be strategic price offers over the entire selling season are constant. Moreover, lengthening the season increases (generally decreases) both sellersʼ profits when the buyer is myopic (strategic). An experimental study largely supports the equilibrium predictions when the buyer is myopic but not when she is strategic. In the latter case, early in the season sellers overprice the good arguably in an attempt to effectively shorten the season and thereby increase their profits.

Keywords: Dynamic pricing; Competitive duopoly; Strategic vs. myopic buyers; Experimental economics (search for similar items in EconPapers)
JEL-codes: C72 C78 C92 D82 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0899825611001461
Full text for ScienceDirect subscribers only

Related works:
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:75:y:2012:i:1:p:250-264

DOI: 10.1016/j.geb.2011.08.018

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 ().