Market Share Dynamics in a Duopoly Model with Word-of-Mouth Communication

Konferenzbeitrag

We analyze dynamic price competition in a homogeneous goods duopoly, where consumers exchange information via word-of-mouth communication. A fraction of consumers, who do not learn any new information, remain locked-in at their previous supplier in each period. We analyze Markov perfect equilibria in which firms use mixed pricing strategies. Market share dynamics are driven by the endogenous price dispersion. Depending on the parameters, we obtain different 'classes' of dynamics. When firms are impatient, there is a tendency towards equal market shares. When firms are patient, there are extended intervals of market dominance, interrupted by sudden changes in the leadership position.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2013: Wettbewerbspolitik und Regulierung in einer globalen Wirtschaftsordnung - Session: Dynamic Models of Duopoly and Labor Markets ; No. A17-V3

Classification and Topics

• Classification: Wirtschaft ; Stochastic and Dynamic Games; Evolutionary Games; Repeated Games ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; Production, Pricing, and Market Structure; Size Distribution of Firms

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kováč, Eugen ; Schmidt, Robert C.
• Event: Veröffentlichung
• (who): ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
• (where): Kiel und Hamburg
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/79994
• Last update: 10.03.2025, 11:45 AM CET