It takes two to tango: equilibria in a model of sales (Q1195600): Difference between revisions

The authors show that the Varian model of sales with more than two firms has two types of equilibria: a unique symmetric equilibrium, and a continuum of asymmetric equilibria. In contrast, the 2-firm game has a unique equilibrium that is symmetric. For the \(n\) firm case the asymmetric equilibria imply mixed strategies that can be ranked by first- order stochastic dominance. This enables one to rule out asymmetric equilibria on economic grounds by constructing a metagame in which both firms and consumers are players. The unique subgame perfect equilibrium of this metagame is symmetric.