Working Paper: NBER ID: w28272
Authors: Andrew Sweeting; Dun Jia Shen; Hui Xinlu Yao
Abstract: We generalize recent models of dynamic price competition where sellers benefit from learning-by-doing by allowing for long-lived strategic buyers, with a single parameter capturing the extent to which each buyer internalizes future buyer surplus. Many of the equilibria that exist when buyers are atomistic or myopic are eliminated when buyers internalize even a modest share of their effects on future surplus. The equilibria that survive tend to be those where long-run market competition is preserved.
Keywords: Dynamic Price Competition; Learning-by-Doing; Strategic Buyers
JEL Codes: C73; D21; D43; L13; L41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| strategic buyer behavior (L21) | lower expected long-run prices (E30) |
| strategic buyer behavior (L21) | elimination of equilibrium multiplicity (C62) |
| internalizing a modest share of future surplus (bp) (H62) | elimination of equilibria that support competition (D43) |
| initial competition may be softened (L13) | reduced net present value of buyer welfare (D69) |
| strategic buyer behavior (L21) | altered market outcomes (D43) |