Dynamic oligopoly pricing with reference-price effects
Version 2 2024-06-18, 22:09Version 2 2024-06-18, 22:09
Version 1 2020-08-13, 14:29Version 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.
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Journal
European journal of operational researchVolume
288Pagination
1006-1016Location
Amsterdam, The NetherlandsPublisher DOI
ISSN
0377-2217Language
engNotes
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C1 Refereed article in a scholarly journalIssue
3Publisher
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