Myopic Oligopoly Pricing

Iwan Bos, Marco Marini and Riccardo Saulle ()

No 5/21, Working Papers from Sapienza University of Rome, DISS

Abstract: This paper examines capacity-constrained oligopoly pricing with sellers who seek myopic improvements. We employ the Myopic Stable Set stability 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 mixed-strategy support. This stability concept thus encompasses all Nash equilibria and offers a pure-strategy solution when there is none in Nash terms. In particular, it provides a behavioral rationale for different types of pricing dynamics, including real-world economic phenomena such as Edgeworth-like price cycles, price dispersion and supply shortages.

Keywords: Behavioral IO; Bounded Rationality; Capacity Constraints; Oligopoly Pricing; Myopic Stable Set. (search for similar items in EconPapers)
JEL-codes: C72 D43 L13 (search for similar items in EconPapers)
Date: 2021-04
New Economics Papers: this item is included in nep-com and nep-gth
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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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