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http://hdl.handle.net/10419/56242
  
Title:Bertrand competition with intertemporal demand PDF Logo
Authors:Dutta, Prajit
Matros, Alexander
Weibull, Jörgen W.
Issue Date:2002
Series/Report no.:SSE/EFI Working Paper Series in Economics and Finance 493
Abstract:In the text-book model of dynamic Bertrand competition, competing firms meet the same demand function every period. This is not a satisfactory model of the demand side if consumers can make intertemporal substitution between periods. Each period then leaves some residual demand to future periods, and consumers who observe price under-cutting may correctly anticipate en ensuing price war and therefore postpone their purchases. Accordingly, the interaction between the firms no longer constitutes a repeated game, and hence falls outside the domain of the usual Folk theorems. We analyze collusive pricing in such situations, and study cases when consumers have perfect and imperfect foresight and varying degrees of patience. It turns out that collusion against patient and forward-looking consumers is easier to sustain than collusion in the text-book model.
Subjects:Bertrand competition
Coase conjecture
dynamic oligopoly
stochastic games
JEL:C73
D43
D91
D92
L13
Document Type:Working Paper
Appears in Collections:SSE/EFI Working Paper Series in Economics and Finance, EFI - The Economic Research Institute, Stockholm School of Economics

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