Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/127111
Authors: 
Aoyagi, Masaki
Bhallay, Manaswini
Gunayz, Hikmet
Year of Publication: 
2014
Series/Report no.: 
ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 909
Abstract: 
This paper studies dynamic price competition over two periods between two firms selling differentiated durable goods to two buyers who are privately informed about their types, but have valuations of the two goods dependent on the other buyer's type. The firms' pricing strategy in period 1 must take into account the buyers' incentive to wait and learn from the other buyer's decision. We construct an equilibrium based on the key observation that the expected price of either good in period 2 is the same as its price in period 1 on and off the path of play. The equilibrium is shown to be non-preemptive in the sense that even if either firm fails to make a sale in period 1, it still makes a sale with positive probability in period 2. A characterization of the equilibrium is given in terms of the probability of delay as a function of the degree of interdependence between the two buyers.
Subjects: 
dynamic pricing
delay
social learning
duopoly
product differentiation
durable good
preemption
revenue management
JEL: 
C72
D82
Document Type: 
Working Paper

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