It is believed that this asymmetry is responsible for the unending cyclic price wars that emerge when the sellers employ myoptimal pricing strategies. In this model there are two competing sellers of news articles in somewhat overlapping categories. In contrast to the vertical differentiation of the Price-Quality model, this model contains a horizontal differentiation in the differing article categories. To the extent that the categories overlap, there can be direct price competition, and to the extent that they differ, there are asymmetries introduced that again lead to the potential for cyclic price wars. In this model, the sellers' products are exactly identical and the profit functions are symmetric.
Myoptimal pricing leads the sellers to undercut each other until the minimum price point is reached.
At that point, a new price war cycle can be launched, due to buyer asymmetries rather than seller asymmetries. The fact that not all buyers use the Shopbot, and some buyers instead choose a seller at random, means that it can be profitable for a seller to abandon the low-price competition for the bargain hunters, and instead maximally exploit the random buyers by charging the maximum possible price. Let and represent the prices charged by seller 1 and seller 2 respectively. Let and represent their respective quality parameters, with . We can see that for small values of , the peak profit is obtained at , whereas for larger values of , there is eventually a discontinuous shift to the other peak, which follows along the parabolic-shaped ridge in the landscape.