Dynamic competition with consumer inertia

Pot, E.A.; Flesch, János; Peeters, Ronald; Vermeulen, A.J.

doi:10.1016/j.jmateco.2013.07.004

Cited by 3 publications

(7 citation statements)

References 27 publications

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“…Regarding the parameter s , the base model in Pot et al . () assumes

s = \frac{1}{2}

, whereas here we allow

s \in false(0, 1 false)

. This generalization enables us to take account of different types of industry.…”

Section: Modelmentioning

confidence: 99%

“…Sellers may facilitate collusion by agreeing not to advertise in each other's home markets, for example. 6 As mentioned above, this paper is closest to Pot et al (2013). It differs in two main respects.…”

mentioning

confidence: 91%

“…Second, Pot et al . () exclusively focus on stationary strategies, whereas the ensuing analysis additionally explores the sustainability of collusive prices by means of punishment strategies.…”

Section: Introductionmentioning

confidence: 99%

“…The purpose of this paper is to provide an answer to these and related questions. Towards that end, we analyze a modified version of the dynamic duopoly game of Pot et al (2013). A key feature of this model is that, in any given period, customers remain loyal to their supplier independent of the price it charges.…”

mentioning

confidence: 99%

“…In particular, the parameter space has been extended to examine both conventional as well as network industries. Second, Pot et al (2013) exclusively focus on stationary strategies, whereas the ensuing analysis additionally explores the sustainability of collusive prices by means of punishment strategies.…”

mentioning

confidence: 99%

See 4 more Smart Citations

Competition versus collusion: The impact of consumer inertia

Bos

Peeters

Pot

2017

Int J of Economic Theory

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We consider a model of dynamic price competition to analyze the impact of consumer inertia on the ability of firms to sustain high prices. Three main consequences are identified: (i ) maintaining high prices does not require punishment strategies when firms are sufficiently myopic, (ii ) if buyers are sufficiently inert, then high prices can be sustained for all discount factors, and (iii ) the ability to maintain high prices may depend nonmonotonically on the level of the discount factor. These results provide a number of valuable insights with regard to competitive and collusive pricing behavior. For example, our findings suggest that measures aiming at lowering the degree of consumer inertia may in fact facilitate collusion in network industries.

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“…Regarding the parameter s , the base model in Pot et al . () assumes