Long Run Price Dynamics in Oligopoly

Régis Renault

Working Papers from Toulouse - GREMAQ

Abstract: It is shown that a fixed cost of nominal price changes enhances the ability of firms to collude in an ologopolistic market for a homogeneous good. Nevertheless, harsh price competition with firms making no profit remains a possible outcome. The analysis focuses on stable symmetric steady states that can be sustained if firms use strategies that depend only on the previous period price. The collusive outcome under inflation is characterized and the resulting price dynamics is compared to that of an equilibrium in which firms earn zero profit.

Keywords: OLIGOPOLIES; PRICES (search for similar items in EconPapers)
JEL-codes: D43 D83 L13 (search for similar items in EconPapers)
Pages: 35 pages
Date: 1997
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Persistent link: https://EconPapers.repec.org/RePEc:fth:gremaq:97.482

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