Strategic Buyers and Privately Observed Prices

Dirk Bergemann and Juuso Välimäki

No 1237, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: A model of repeated price competition with large buyers is analyzed. The sellers are allowed to offer different prices to different buyers and the buyers act strategically. The set of subgame perfect Equilibria is investigated under public and private monitoring. With public monitoring the equilibrium set with large buyers expands relative to the standard model where each buyer is small and behaves myopically. With private monitoring, where prices are not observable to the competing sellers, the set of equilibrium payoffs shrinks. In the finitely repeated game with private monitoring, all sales are made by the efficient seller. In the infinitely repeated game this result is preserved as long as the sellers condition their prices on the public history. In contrast to the finite horizon game, the set of pure strategy equilibria expands if the sellers are allowed to condition their own past prices. Comparisons are drawn to Markovian equilibria of similar dynamic games.

Keywords: Repeated games; private monitoring; collusion (search for similar items in EconPapers)
JEL-codes: C72 D43 (search for similar items in EconPapers)
Pages: 20 pages
Date: 1999-10
Note: CFP 1079.
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Published in Journal of Economic Theory (2002), 105: 469-482

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