Competition in schedules with cursed traders

• 成果类型: Article
• 署名作者: Bayona, Anna; Manzano, Carolina
• 署名单位: Universitat Ramon Llull; Escuela Superior de Administracion y Direccion de Empresas (ESADE); Universitat Rovira i Virgili
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2024.105935
• 发表日期: 2024
• 关键词: Cursed equilibrium; market power; market quality; Total surplus

摘要

We study a market with sellers that compete in supply functions, face an elastic demand, and have imperfect cost information. In our model, sellers neglect some informational content of the price. In order to capture this feature, we use the cursed expectations equilibrium concept. In the linear- quadratic-normal framework, this paper presents conditions under which the unique equilibrium in linear supply functions exists and derives some comparative statics results. Compared to markets with fully rational sellers, we find that market power and the expected price-cost margin are lower; the price reaction to private information can be higher due to imperfect competition and demand elasticity; expected profits can be greater; and expected total surplus can also increase if the efficiency gains from reduced market power outweigh the losses from cursedness.