Myopic Oligopoly Pricing

Iwan Bos, Marco Marini and Riccardo D. Saulle
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Riccardo D. Saulle: University of Padova

No 2021.32, Working Papers from Fondazione Eni Enrico Mattei

Abstract: This paper examines capacity-constrained oligopoly pricing with sellers who seek myopic improvements. We employ the Myopic Stable Set solution concept and establish the existence of a unique pure-strategy price solution for any given level of capacity. This solution is shown to coincide with the set of pure-strategy Nash equilibria when capacities are large or small. For an intermediate range of capacities, it predicts a price interval that includes the mixedstrategy support. This stability concept thus encompasses all Nash equilibria and offers a pure-strategy solution when there is none in Nash terms. It particularly provides a behavioral rationale for different pricing patterns, including Edgeworth price cycles and states of hyper-competition with supply shortages. We also analyze the impact of a change in firm size distribution. A merger among the biggest firms may lead to more price dispersion as it increases the maximum and decreases the minimum myopically stable price.

Keywords: Bounded Rationality; Capacity Constraints; Mergers; Myopic Stable Set; Oligopoly Pricing; Supply Shortages (search for similar items in EconPapers)
JEL-codes: C72 D43 L13 (search for similar items in EconPapers)
Date: 2021-12
New Economics Papers: this item is included in nep-bec, nep-com, nep-cwa, nep-gth and nep-reg
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Myopic oligopoly pricing (2024)
Working Paper: Myopic Oligopoly Pricing (2021)
Working Paper: Myopic Oligopoly Pricing (2021)
Working Paper: Myopic Oligopoly Pricing (2021)
Working Paper: Myopic Oligopoly Pricing (2021)
Working Paper: Myopic Oligopoly Pricing (2021)
Working Paper: Myopic Oligopoly Pricing (2021)
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