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Temporary boycotts as self-fulfilling disruptions of markets

James Peck

Journal of Economic Theory, 2017, vol. 169, issue C, 1-12

Abstract: This paper demonstrates how equilibrium involving anticipated boycotts and actual boycotts can occur, even though consumers are negligible and only care about the price they pay and the timing of purchase. The model is a two-period durable goods monopoly game with demand uncertainty. First, a “non-boycott” equilibrium is characterized. Under regularity assumptions ruling out multiplicative uncertainty, there are additional equilibria in which the firm sets a low price in period 0, based on the anticipation that consumers will boycott whenever the price exceeds a threshold. Also, the augmented game, with a publicly observed sunspot, has equilibria in which boycotts occur on the equilibrium path with positive probability.

Keywords: Boycott; Sunspot; Monopoly; Demand uncertainty (search for similar items in EconPapers)
JEL-codes: C73 D42 D83 L12 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:jetheo:v:169:y:2017:i:c:p:1-12