THE DYNAMICS OF BERTRAND PRICE COMPETITION WITH COST-REDUCING INVESTMENTS

• 成果类型: Article
• 署名作者: Iskhakov, Fedor; Rust, John; Schjerning, Bertel
• 署名单位: Australian National University; Georgetown University; University of Copenhagen
• 刊物名称: INTERNATIONAL ECONOMIC REVIEW
• ISSN/ISSBN: 0020-6598
• DOI: 10.1111/iere.12317
• 发表日期: 2018
• 页码: 1681-1731
• 关键词: equilibria; INNOVATION

摘要

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.