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Dynamic oligopoly pricing with reference-price effects

Version 2 2024-06-18, 22:09
Version 1 2020-08-13, 14:29
journal contribution
posted on 2024-06-18, 22:09 authored by L Colombo, P Labrecciosa
© 2020 Elsevier B.V. We analyze the strategic implications of consumers’ reference-price effects, either symmetric (for loss-neutral consumers) or asymmetric (for loss-averse consumers), in a differentiated oligopoly model where firms compete either in prices (à la Bertrand) or in quantities (à la Cournot) over an infinite time horizon. The dynamic game is specified in continuous time. The solution concept is Markov Perfect Equilibrium. We show how price dynamics in the presence of reference-price effects crucially depends on the nature of market competition. One of the main results of our analysis is that, with loss-averse consumers, there exists an interval of initial reference prices such that firms adopt the same constant-pricing strategy in both the Bertrand and the Cournot games, implying that the distinction between price and quantity competition has no impact on market conduct and performance.

History

Journal

European journal of operational research

Volume

288

Pagination

1006-1016

Location

Amsterdam, The Netherlands

ISSN

0377-2217

Language

eng

Notes

In press

Publication classification

C1 Refereed article in a scholarly journal

Issue

3

Publisher

Elsevier

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