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Myopic Oligopoly Pricing

Bos, Iwan and Marini, Marco A. and Saulle, Riccardo (2021): Myopic Oligopoly Pricing.

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Abstract

This paper examines capacity-constrained oligopoly pricing with sellers who seekmyopic 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.

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  • Myopic Oligopoly Pricing. (deposited 21 Dec 2021 14:39) [Currently Displayed]
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