Dynamic Price Competition, Learning-by-Doing, and Strategic BuyersAndrew Sweeting, Dun Jia, Shen Hui, Xinlu Yao ,
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American Economic Review
We examine how strategic buyer behavior affects equilibrium outcomes in a model of dynamic price competition where sellers benefit from learning-by-doing by allowing each buyer to expect to capture a share of future buyer surplus. Many equilibria that exist when buyers consider only their immediate payoffs are eliminated when buyers expect to capture even a modest share of future surplus, and the equilibria that survive are those where long-run market competition is more likely to be preserved.