The Dynamics of Bertrand Price Competition with Cost-Reducing Investments

Research output: Contribution to journal › Journal article › Research › peer-review

Standard

The Dynamics of Bertrand Price Competition with Cost-Reducing Investments. / Iskhakov, Fedor; Rust, John; Schjerning, Bertel.

In: International Economic Review, Vol. 59, No. 4, 13.11.2018, p. 1681-1731.

Research output: Contribution to journal › Journal article › Research › peer-review

Harvard

Iskhakov, F, Rust, J & Schjerning, B 2018, 'The Dynamics of Bertrand Price Competition with Cost-Reducing Investments', International Economic Review, vol. 59, no. 4, pp. 1681-1731. https://doi.org/10.1111/iere.12317

APA

Iskhakov, F., Rust, J., & Schjerning, B. (2018). The Dynamics of Bertrand Price Competition with Cost-Reducing Investments. International Economic Review, 59(4), 1681-1731. https://doi.org/10.1111/iere.12317

Vancouver

Iskhakov F, Rust J, Schjerning B. The Dynamics of Bertrand Price Competition with Cost-Reducing Investments. International Economic Review. 2018 Nov 13;59(4):1681-1731. https://doi.org/10.1111/iere.12317

Author

Iskhakov, Fedor ; Rust, John ; Schjerning, Bertel. / The Dynamics of Bertrand Price Competition with Cost-Reducing Investments. In: International Economic Review. 2018 ; Vol. 59, No. 4. pp. 1681-1731.

Bibtex

@article{d35cf85ee15a4a729e5d0410a3dcba69,
title = "The Dynamics of Bertrand Price Competition with Cost-Reducing Investments",
abstract = "We extend the classic Bertrand duopoly model of price competition to a dynamic setting where competing duopolists invest in a stochastically improving production technology to “leapfrog” their rival and attain temporary low cost leadership. We find a huge multiplicity of Markov perfect equilibria (MPE) and show that when firms move simultaneously the set of all MPE payoffs is a triangle that includes monopoly payoffs and a symmetric zero mixed strategy payoff. When firms move asynchronously, the set of MPE payoffs is strictly within this triangle, but there still is a vast multiplicity of MPE, most of which involve leapfrogging.",
author = "Fedor Iskhakov and John Rust and Bertel Schjerning",
note = "Lead Article",
year = "2018",
month = nov,
day = "13",
doi = "10.1111/iere.12317",
language = "English",
volume = "59",
pages = "1681--1731",
journal = "International Economic Review",
issn = "0020-6598",
publisher = "Wiley-Blackwell",
number = "4",

}

RIS

TY - JOUR

T1 - The Dynamics of Bertrand Price Competition with Cost-Reducing Investments

AU - Iskhakov, Fedor

AU - Rust, John

AU - Schjerning, Bertel

N1 - Lead Article

PY - 2018/11/13

Y1 - 2018/11/13

N2 - We extend the classic Bertrand duopoly model of price competition to a dynamic setting where competing duopolists invest in a stochastically improving production technology to “leapfrog” their rival and attain temporary low cost leadership. We find a huge multiplicity of Markov perfect equilibria (MPE) and show that when firms move simultaneously the set of all MPE payoffs is a triangle that includes monopoly payoffs and a symmetric zero mixed strategy payoff. When firms move asynchronously, the set of MPE payoffs is strictly within this triangle, but there still is a vast multiplicity of MPE, most of which involve leapfrogging.

AB - We extend the classic Bertrand duopoly model of price competition to a dynamic setting where competing duopolists invest in a stochastically improving production technology to “leapfrog” their rival and attain temporary low cost leadership. We find a huge multiplicity of Markov perfect equilibria (MPE) and show that when firms move simultaneously the set of all MPE payoffs is a triangle that includes monopoly payoffs and a symmetric zero mixed strategy payoff. When firms move asynchronously, the set of MPE payoffs is strictly within this triangle, but there still is a vast multiplicity of MPE, most of which involve leapfrogging.

U2 - 10.1111/iere.12317

DO - 10.1111/iere.12317

M3 - Journal article

VL - 59

SP - 1681

EP - 1731

JO - International Economic Review

JF - International Economic Review

SN - 0020-6598

IS - 4

ER -

ID: 147222266