Patterns of competitive interaction

Mark Armstrong and John Vickers

MPRA Paper from University Library of Munich, Germany

Abstract: We explore patterns of price competition in an oligopoly where consumers vary in the set of firms they consider for their purchase and buy from the lowest-priced firm they consider. We study a pattern of consideration, termed "symmetric interactions", that generalises models used in existing work (duopoly, symmetric firms, and firms with independent reach). Within this class, equilibrium profits are proportional to a firm's reach, firms with a larger reach set higher average prices, and a reduction in the number of firms (either by exit or by merger) harms consumers. We go on to study patterns of consideration with asymmetric interactions. In situations with disjoint reach and with nested reach we find equilibria in which price competition is "duopolistic": only two firms compete within each price range. We characterize equilibria in the three-firm case, and show how entry and merger can affect patterns of price competition in novel ways.

Keywords: Price competition; Consideration sets; Mixed strategies; Entry and mergers (search for similar items in EconPapers)
JEL-codes: D43 D83 L13 L4 (search for similar items in EconPapers)
Date: 2020-09
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind, nep-mic and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://mpra.ub.uni-muenchen.de/102789/1/MPRA_paper_102789.pdf original version (application/pdf)

Related works:
Journal Article: Patterns of Competitive Interaction (2022)
Working Paper: Patterns of Competitive Interaction (2021)
Working Paper: Patterns of Competitive Interaction (2021)
Working Paper: Patterns of Competitive Interaction (2019)
Working Paper: Patterns of Competitive Interaction (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:102789

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