Dynamic Games and Applications

, Volume 8, Issue 2, pp 232–253 | Cite as

Intertemporal Non-separability and Dynamic Oligopoly

  • Curtis Eberwein
  • Ted To


We construct a framework for modeling dynamic Cournot oligopoly. We consider models where utility maximizing consumers give rise to demand functions that depend on current and prior period prices. Future demand depends on the current price and consumers, and firms must take this into account when making their decisions. Focusing on problems that yield dynamic demand functions that are linear in current and prior period price, we characterize the unique Markov perfect equilibrium in linear strategies. We then demonstrate the applicability of our framework through a series of practical examples.


Dynamic oligopoly Durable goods Habit persistence Inventories 

JEL Classification

C73 D21 D43 



We thank two anonymous referees for helpful comments and suggestions. The views expressed are those of the authors and do not necessarily reflect those of the Bureau of Labor Statistics.


  1. 1.
    Becker GS, Murphy KM (1988) A theory of rational addiction. J Polit Econ 96(4):675–700CrossRefGoogle Scholar
  2. 2.
    Bils M, Klenow PJ (2004) Some evidence on the importance of sticky prices. J Polit Econ 112(5):947–985CrossRefGoogle Scholar
  3. 3.
    Bond EW, Samuelson L (1984) Durable goods monopolies with rational expectations. RAND J Econ 15:336–345MathSciNetCrossRefGoogle Scholar
  4. 4.
    Bulow J (1982) Durable-goods monopolists. J Polit Econ 1982:314–332CrossRefGoogle Scholar
  5. 5.
    Carlton DW (1986) The rigidity of prices. Am Econ Rev 76:637–658Google Scholar
  6. 6.
    Caucutt EM, Ghosh M, Kelton CM (1999) Durability versus concentration as an explanation for price inflexibility. Rev Ind Organ 14:27–50CrossRefGoogle Scholar
  7. 7.
    Cooper R, Haltiwanger J (1990) Inventories and the propagation of sectoral shocks. Am Econ Rev 80(1):170–190Google Scholar
  8. 8.
    Driskill R (1997) Durable-goods monopoly, increasing marginal cost and depreciation. Economica 64(253):137–154CrossRefGoogle Scholar
  9. 9.
    Driskill R (2001) Durable goods oligopoly. Int J Ind Organ 19(3–4):391–413CrossRefGoogle Scholar
  10. 10.
    Driskill R, McCafferty S (2001) Monopoly and oligopoly provision of addictive goods. Int Econ Rev 42(1):43–72MathSciNetCrossRefGoogle Scholar
  11. 11.
    Dudine P, Hendel I, Lizzeri A (2006) Storable good monopoly: the role of commitment. Am Econ Rev 96(5):1706–1719CrossRefGoogle Scholar
  12. 12.
    Fethke G, Jagannathan R (1996) Habit persistence, heterogeneous tastes, and imperfect competition. J Econ Dyn Control 20:1193–1207CrossRefzbMATHGoogle Scholar
  13. 13.
    Hall RE (1988) Intertemporal substitution in consumption. J Polit Econ 96:339–357CrossRefGoogle Scholar
  14. 14.
    Stokey N (1981) Rational expectations and durable goods pricing. Bell J Econ 12:112–128MathSciNetCrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York (outside the USA) 2017

Authors and Affiliations

  1. 1.Center for Human Resource ResearchOhio State UniversityColumbusUSA
  2. 2.Bureau of Labor StatisticsWashingtonUSA

Personalised recommendations