Dynamic Duopoly with Inattentive Firms

Arbeitspapier

This paper analyzes an infinite horizon dynamic duopoly with stochastic demand in which firms face costs of absorbing and processing information. Our main result is that the structure of dates at which firms choose to absorb information differ starkly between price and quantity competition. Firms synchronize their actions under price competition whereas they plan sequentially and in an alternating manner under quantity competition. The reason is that under quantity competition the planning firm reduces the uncertainty in the residual demand curve of the inattentive firm which renders planning less attractive for that firm. The opposite holds true under price competition.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: BGPE Discussion Paper ; No. 58

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 ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
• Subject: Inattentiveness ; Price Competition ; Quantity Competition ; Synchronization

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Reisinger, Markus ; Ressner, Ludwig
• Event: Veröffentlichung
• (who): Friedrich-Alexander-Universität Erlangen-Nürnberg, Bavarian Graduate Program in Economics (BGPE)
• (where): Nürnberg
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/73351
• Last update: 10.03.2025, 11:43 AM CET