Abstract
In this paper, we consider a linear price setting duopoly competition with differentiated goods and with unknown costs. The firms’ aims are to choose the prices of their products according to the well-known concept of perfect Bayesian Nash equilibrium. 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.
We suppose that each firm has two different technologies, and uses one of them following a probability distribution. The utilization of one or the other technology affects the unitary production cost. We show that there is exactly one perfect Bayesian Nash equilibrium for this game. We analyze the advantages, for firms and for consumers, of using the technology with highest production cost versus the one with cheapest production cost.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
von Stackelberg, H.: Marktform und Gleichgewicht. Julius Springer, Vienna (1934)
Gibbons, R.: A Primer in Game Theory. Pearson Prentice Hall, Harlow (1992)
van Damme, E., Hurkens, S.: Endogenous price leadership. Games and Economic Behavior, 47, 404–420 (2004)
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2007 Springer
About this paper
Cite this paper
Ferreira, F.A., Ferreira, F., Pinto, A.A. (2007). Bayesian price leadership. In: Taş, K., Tenreiro Machado, J.A., Baleanu, D. (eds) Mathematical Methods in Engineering. Springer, Dordrecht. https://doi.org/10.1007/978-1-4020-5678-9_32
Download citation
DOI: https://doi.org/10.1007/978-1-4020-5678-9_32
Publisher Name: Springer, Dordrecht
Print ISBN: 978-1-4020-5677-2
Online ISBN: 978-1-4020-5678-9
eBook Packages: EngineeringEngineering (R0)