Price Dynamics and Consumer Learning

Ramon Caminal and Xavier Vives

No 1744, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper studies the price dynamics induced by strategic firm behaviour in the presence of consumer learning about the uncertain quality differential of the products offered by a duopoly. It is found that consumers learn slowly and also that prices converge slowly to full-information levels. A consequence is that the incentives of firms to manipulate consumers’ beliefs are relatively persistent. Although pricing tends to be aggressive at the early stages, and average prices eventually increase over time, price wars may occur at intermediate stages of the product life-cycle.

Keywords: Learning; Market Shares; oligopoly pricing (search for similar items in EconPapers)
JEL-codes: D43 D83 L13 (search for similar items in EconPapers)
Date: 1997-11
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=1744 (application/pdf)

Related works:
Journal Article: Price Dynamics and Consumer Learning (1999)
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:cpr:ceprdp:1744

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=1744

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().