Does the absence of competition in the market foster competition for the market? A dynamic approach to aftermarkets

Didier Laussel () and Joana Resende

No 2008033, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: In this paper, we investigate dynamic price competition when firms strategically interact in two distinct but interrelated markets: a primary market and an aftermarket, where indirect network effects arise. We set up a differential game of two-dimensional price competition and we conclude that the absence of price competition in the aftermarket (competition in the market) fosters dynamic price competition in the primary market (competition for the market). We also investigate the impact of network sizes on firms' prices in the primary market concluding that, in equilibrium, larger firms have incentives to compete more fiercely for new "uncolonized" consumers.

Keywords: dynamic competition; differential games; Linear Markov Perfect Equilibrium; aftermarkets; network effects. (search for similar items in EconPapers)
JEL-codes: C61 L11 L13 (search for similar items in EconPapers)
Date: 2008-05-01
New Economics Papers: this item is included in nep-com, nep-ind, nep-mic and nep-net
References: Add references at CitEc
Citations:

Downloads: (external link)
https://sites.uclouvain.be/core/publications/coredp/coredp2008.html (application/pdf)

Related works:
Working Paper: Does the absence of competition in the market foster competition for the market ? A dynamic approach to aftermarkets (2008)
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:cor:louvco:2008033

Access Statistics for this paper

More papers in LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Alain GILLIS ().