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Market learning and price-dispersion

Author

Listed:
  • Amparo Urbano Salvador

    (Universitat de València)

  • María Dolores Alepuz Domenech

    (Universitat de València)

Abstract

This paper analyzes how learning considerations may influence the pricing behavior of a duopoly facing demand uncertainty. We consider a symmetric duopoly game with product differentiation where firms have imperfect information about some parameters of the market demands. Firm learn about these parameters by observing market sales in the two markets. The central body of this paper consists in showing the conditions under which there exists price dispersion at the equilibrium in pure strategies. In particular, when both -product substitutes- firms experiment in each of the two markets and they have the same ability to make market signals more informative, they will price-disperse as an attempt to increase the informative content of these signals. In this way, a "sampling effect" may arise as the outcome of market learning behavior.

Suggested Citation

  • Amparo Urbano Salvador & María Dolores Alepuz Domenech, 1994. "Market learning and price-dispersion," Working Papers. Serie AD 1994-14, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:1994-14
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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-1994-14.pdf
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    Citations

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    Cited by:

    1. Dolores Alepuz, M. & Urbano, Amparo, 1999. "Duopoly experimentation: Cournot competition," Mathematical Social Sciences, Elsevier, vol. 37(2), pages 165-188, March.
    2. Carmen Bevi?Author-Email: Carmen.Bevia@uab.es & Luis C. Corch?n & Simon Wilkie, "undated". "Implementation of the Walrasian Correspondence by Market Games," UFAE and IAE Working Papers 493.01, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    3. José Alcalde, 1994. "Exchange-proofness or divorce-proofness? Stability in one-sided matching markets," Review of Economic Design, Springer;Society for Economic Design, vol. 1(1), pages 275-287, December.
    4. José J. Sempere Monerris & Amparo Urbano & María Dolores Alepuz, 1998. "- Duopoly Price Communication," Working Papers. Serie AD 1998-26, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    5. Belleflamme, Paul & Bloch, Francis, 2001. "Price and quantity experimentation: A synthesis," International Journal of Industrial Organization, Elsevier, vol. 19(10), pages 1563-1582, December.
    6. Luis Corchón & Andreu Mas-Colell, 1995. "A Note On Stability Of Best Reply And Gradient Systems With Applications To Imperfectly Competitive Models," Working Papers. Serie AD 1995-18, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).

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