Limit-Pricing and Learning-By-Doing: A Dynamic Game with Incomplete Information

Ke Yang

International Journal of Business and Economics, 2010, vol. 9, issue 3, 201-212

Abstract: We study a firm's pricing/output strategy under threat of entry in a two-period game with asymmetric information, where the firm can reduce future cost through learning-by-doing. In contrast with previous literature, we show that a firm's incentive to reduce cost through higher production may not align with its incentive to signal its cost type. As a consequence, in equilibrium, the incumbent firm might distort its price upward instead of downward.

Keywords: limit-pricing; learning-by-doing; dynamic game (search for similar items in EconPapers)
JEL-codes: L11 L12 L13 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (4)

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