Dynamic price competition |
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Authors: | Dirk Bergemann |
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Institution: | a Department of Economics, Yale University, New Haven, CT 06520-8268, USA b Helsinki School of Economics, University of Southampton, Rune Bergin Katu 22-24, P.O. Box 1210, 00101, Helsinki, Finland |
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Abstract: | We consider the model of price competition for a single buyer among many sellers in a dynamic environment. The surplus from each trade is allowed to depend on the path of previous purchases, and as a result, the model captures phenomena such as learning by doing and habit formation in consumption.We characterize Markovian equilibria for finite and infinite horizon versions of the model and show that the stationary infinite horizon version of the model possesses an efficient equilibrium where all the sellers receive an equilibrium payoff equal to their marginal contribution to the social welfare. |
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Keywords: | D81 D83 |
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