Dynamic limit pricing
Accepted version
Peer-reviewed
Repository URI
Repository DOI
Change log
Authors
Toxvaerd, Flavio https://orcid.org/0000-0003-1979-9695
Abstract
jats:pI study a multiperiod model of limit pricing under one‐sided incomplete information. I characterize pooling and separating equilibria and their existence and determine when these involve limit pricing. For some parameter constellations, the unique equilibrium surviving a D1 type refinement involves immediate separation on monopoly prices. For others, there are limit price equilibria surviving the refinement in which different types may initially pool and then (possibly) separate. Separation involves setting prices such that the inefficient incumbent's profits from mimicking are negative. As the horizon increases or as firms become more patient, limit pricing becomes increasingly difficult to sustain in equilibrium.</jats:p>
Description
Keywords
dynamic limit pricing, entry deterrence, dynamic signaling, equilibrium selection
Journal Title
The RAND Journal of Economics
Conference Name
Journal ISSN
0741-6261
1756-2171
1756-2171
Volume Title
Publisher
Wiley