The noisy duopolist
By: David Spector
Contributors: Massachusetts Institute of Technology. Dept. of Economics
Series: Working paper series / Massachusetts Institute of Technology, Dept. of Economics -- working paper 01-09; Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 01-09.
Publisher: Massachusetts Institute of Technology, Dept. of Economics
Published: 2000
Place of publication: Cambridge, MA
Language: eng
Number of pages: 22
Description: This paper provides an explanation for noisy pricing based on the strategic interaction of two firms competing in prices. When a firm adds noise to its prices, undercutting it becomes harder. Therefore, noisy pricing allows a firm to either exclude a competitor while charging supracompetitive prices, or to soften competition and have both firms earn supracompetitive profits. Such behavior leads to prices lying between the competitive and monopolistic levels, and harms consumers and social welfare. It occurs in equilibrium if firms set prices sequentially, and in some equilibria of a repeated game of simultaneous price-setting if one firm is patient. Keywords: oligopoly theory, price theory.
Notes: Title from cover.

"December 2000." "December, 2000 (first version: June, 2000)"--P. 1.

Includes bibliographical references (p. 14-15).

Abstract in HTML and working paper for download in PDF available via World Wide Web at the Social Science Research Network.