repeated games price competition price leadership

Introduction

The study of repeated games in the context of price competition and price leadership is crucial for understanding how firms strategize over time to maximize profits. This research area explores how firms interact in markets with various constraints and strategic considerations, such as capacity constraints, product differentiation, and the potential for collusion.

Key Insights

Collusive Price Leadership with Capacity Constraints:
- Large firms may set prices early to demonstrate commitment to not deviating, which can raise collusive prices and increase profits for all firms involved.
Quantum Repeated Pricing Game:
- In a quantum version of a twice-repeated pricing game, firms can achieve higher payoffs with entangled initial states, leading to multiple pure-strategy Nash equilibria in each stage.
Local ISPs Pricing Strategies:
- Repeated game concepts can be applied to local ISPs, where Subgame-Perfect Nash equilibrium points are identified as solutions, indicating strategic pricing interactions over time.
Repeated Price Competition with Increasing Marginal Costs:
- Firms facing increasing marginal costs and positive fixed costs can achieve pure strategy equilibria in repeated games, supported by optimal penal codes.
Price Leadership in Duopoly with Capacity Constraints and Product Differentiation:
- In duopolies with capacity constraints and product differentiation, a large capacity firm often emerges as the endogenous price leader, especially when products are imperfect substitutes.

Conclusion

The research on repeated games in price competition and price leadership reveals several strategic behaviors. Large firms may lead in setting prices to foster collusion, quantum strategies can enhance payoffs, and local ISPs can use repeated game strategies to find equilibrium points. Additionally, firms with increasing marginal costs can achieve stable equilibria, and in duopolies, the firm with larger capacity often becomes the price leader. These insights collectively enhance our understanding of strategic pricing in competitive markets.

Repeated games price competition price leadership

Summary

Introduction

Key Insights

Conclusion

Sources and full results

Collusive price leadership with capacity constraints

Collusive price leadership in capacity-constrained repeated price competition leads to higher profits for all firms, as early price setting demonstrates commitment and raises the collusive price compared to simultaneous moves.

Quantum repeated pricing game

The quantum repeated pricing game has three pure-strategy Nash equilibria in every stage, potentially leading to higher payoffs for both firms compared to the classical game.

Local ISPs Pricing Strategies in the Repeated Game Concepts

Repeated games can help local ISPs optimize their pricing strategies by analyzing economic interactions between them and finding subgame-perfect Nash equilibrium points.

Repeated price competition with increasing marginal costs

Pure strategy equilibria exist in repeated price competition with increasing marginal costs and positive fixed costs, supporting optimal penal codes.

Price leadership in a duopoly with capacity constraints and product differentiation

A large capacity firm can emerge as the dominant price leader in a duopoly with capacity constraints and imperfect substitutes, providing a game theoretic model of dominant firm price leadership.

Repeated price competition between individuals and between teams

Individual price competition leads to higher asking prices than team competition, and prices are sustained at higher levels when each team member is paid his or her own asking price than when profits are shared equally.

Endogenous price leadership and technological differences

The technologically superior firm tends to become a price leader in a duopolistic market due to the interaction of competitive force and collusive force, preventing excessive price choices.

A Model of Price Leadership Based on Consumer Loyalty

Consumer loyalty plays a significant role in establishing the existence and identity of a price leader in a duopolistic price setting game.

Basing Point Pricing - Competition Versus Collusion

Basing point pricing (BPP) can emerge in dynamic contexts and can serve as a punishment device in repeated competition.

Oligopolistic Price Leadership and Mergers: The United States Beer Industry

Price leadership in the beer industry increases profits by 17 percent in 2006-2007 and 22 percent in 2010-2011, mainly due to consolidation and mergers.

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