Myopic Oligopoly Pricing

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 009.2021

Classification and Topics

• Classification: Wirtschaft ; Noncooperative Games ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Oligopoly and Other Imperfect Markets
• Subject: Behavioral IO ; Bounded Rationality ; Capacity Constraints ; Oligopoly Pricing ; Myopic Stable Set

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bos, Iwan ; Marini, Marco A. ; Saulle, Riccardo D.
• Event: Veröffentlichung
• (who): Fondazione Eni Enrico Mattei (FEEM)
• (where): Milano
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/233094
• Last update: 10.03.2025, 11:43 AM CET