Nonlinear Science and Complexity pp 397-403 | Cite as
Price-Setting Dynamical Duopoly with Incomplete Information
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Abstract
We consider a price competition in a duopoly with substitutable goods, linear and symmetric demand. There is a firm (F 1) that chooses first the price p 1 of its good; the other firm (F 2) observes p 1 and then chooses the price p 2 of its good. The conclusions of this price-setting dynamical duopoly are substantially altered by the presence of either differentiated goods or asymmetric information about rival’s production costs.
In this paper, we consider asymmetric information about rival’s production costs. We do ex-ante and ex-post analyses of firms’ profits and market prices. We compare the ex-ante firms’ expected profits with the ex-post firms’ profits.
Keywords
Game theory Industrial organization Optimization UncertaintyNotes
Acknowledgements
We thank the Programs POCTI and POCI by FCT and Ministério da Ciência, Tecnologia e do Ensino Superior for their financial support. F.A. Ferreira and F. Ferreira gratefully acknowledge financial support from ESEIG/IPP and from Centro de Matemática da Universidade do Porto. A.A. Pinto also acknowledges financial support from Centro de Matemática da Universidade do Minho.
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