Bertrand competition with intertemporal demand

Arbeitspapier

In the text-book model of dynamic Bertrand competition, competing firms meet the same demand function every period. This is not a satisfactory model of the demand side if consumers can make intertemporal substitution between periods. Each period then leaves some residual demand to future periods, and consumers who observe price under-cutting may correctly anticipate en ensuing price war and therefore postpone their purchases. Accordingly, the interaction between the firms no longer constitutes a repeated game, and hence falls outside the domain of the usual Folk theorems. We analyze collusive pricing in such situations, and study cases when consumers have perfect and imperfect foresight and varying degrees of patience. It turns out that collusion against patient and forward-looking consumers is easier to sustain than collusion in the text-book model.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SSE/EFI Working Paper Series in Economics and Finance ; No. 493

Classification and Topics

• Classification: Wirtschaft ; Stochastic and Dynamic Games; Evolutionary Games; Repeated Games ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡ ; Oligopoly and Other Imperfect Markets
• Subject: Bertrand competition ; Coase conjecture ; dynamic oligopoly ; stochastic games ; Duopol ; Theorie ; Stochastisches Spiel

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dutta, Prajit ; Matros, Alexander ; Weibull, Jörgen W.
• Event: Veröffentlichung
• (who): Stockholm School of Economics, The Economic Research Institute (EFI)
• (where): Stockholm
• (when): 2002

Further information

• Handle: http://hdl.handle.net/10419/56242
• Last update: 10.03.2025, 11:44 AM CET