Dynamic Price Competition, Learning-by-Doing, and Strategic Buyers
Andrew Sweeting, Dun Jia, Shen Hui, Xinlu Yao
,
4
(
112
)
American Economic Review
1311-1333
April
2022
aer.20202016ASweeting.pdf1.78 MB
Abstract
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.