Dynamic Oligopoly Pricing with Asymmetric Information: Implications for Horizontal Mergers

Andrew Sweeting, Xuezhen Tao and Xinlu Yao

No 28589, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We model differentiated product pricing by firms that possess private information about serially-correlated state variables, such as their marginal costs, and can use prices to signal information to rivals. In a dynamic game, we show that signaling can raise prices significantly above static complete information Nash levels, even when the privately observed state variables are restricted to lie in narrow ranges. We calibrate our model using data from the beer industry, and show that our model can explain changes in price levels, price dynamics and cost pass-through after the 2008 MillerCoors joint venture.

JEL-codes: D43 D82 L13 L41 L90 (search for similar items in EconPapers)
Date: 2021-03
New Economics Papers: this item is included in nep-bec, nep-com, nep-cta, nep-gth, nep-ind, nep-mic and nep-ore
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Published as Andrew Sweeting & Xuezhen Tao & Xinlu Yao, 2024. "Dynamic Oligopoly Pricing with Asymmetric Information: Implications for Horizontal Mergers," American Economic Journal: Microeconomics, vol 16(3), pages 345-373.

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