Information, Bertrand-Edgeworth competition and the law of one price

Edwards, Robert A and Routledge, Robert R (2022) Information, Bertrand-Edgeworth competition and the law of one price. JOURNAL OF MATHEMATICAL ECONOMICS, 101. p. 102658.

Text
IBCLP Ver 3.3 JME R2 V2.pdf - Author Accepted Manuscript
Download (338kB) | Preview

Official URL: http://dx.doi.org/10.1016/j.jmateco.2022.102658

Abstract

Homogeneous goods often sell at different prices within the same market. This paper proposes a theoretical foundation for this phenomenon in the context of a capacity-constrained price game. Sellers have asymmetric information about the market demand, modelled by a partition of the state space, and evaluate uncertain profits in a way consistent with ambiguity aversion. We demonstrate that a pure strategy price equilibrium exists if the market demand is uniformly elastic in each state. Interestingly, the sellers may choose different prices, violating the law of one price. Moreover, market demand may be rationed between the sellers, resulting in consumers purchasing at different prices.

Item Type:	Article
Uncontrolled Keywords:	Incomplete information, Bertrand-Edgeworth competition, Ambiguity aversion, Law of one price
Divisions:	Faculty of Humanities and Social Sciences > School of Management
Depositing User:	Symplectic Admin
Date Deposited:	14 Mar 2022 17:29
Last Modified:	14 Aug 2023 01:30
DOI:	10.1016/j.jmateco.2022.102658
Related URLs:	Author Publisher
URI:	https://livrepository.liverpool.ac.uk/id/eprint/3150676