Klaus Wallner: Stockholm Institute of Transition Economics and East European Economies (SITE), Postal: Stockholm School of Economics, P.O. Box 6501, S-113 83 Stockholm, Sweden
Abstract: This paper analyzes a finite horizon, sequential move pricing duopoly, restricting attention to Markov-strategies. The solution yields stationary patterns, independent of initial conditions, where the reaction-functions follow cycles of three periods. The market price never settles down, and is at all times strictly above marginal cost. Long-run average industry profits are approximately 5/6 of the monopoly level. These results demonstrate that neither a long horizon, nor non-Markovian strategies are required for persistent profits in dynamic price-competition games.
15 pages, First version: November 11, 1997. Revised: July 3, 1998.
Full text files
hastef0206.rev.ps.zip Full text
hastef0206.rev.ps Full text
hastef0206.rev.pdf Full text
hastef0206.rev.pdf.zip Full text
Questions (including download problems) about the papers in this series should be directed to Helena Lundin ()
Report other problems with accessing this service to Sune Karlsson ().
This page generated on 2018-01-27 00:01:19.