Sluggish consumers: An evolutionary solution to the Bertrand paradox. (Q1864809)
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English | Sluggish consumers: An evolutionary solution to the Bertrand paradox. |
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Sluggish consumers: An evolutionary solution to the Bertrand paradox. (English)
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23 March 2003
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The author investigates how the behavior of sellers and consumers trading a homogeneous commodity evolves over time if the sellers revise their decisions by imitation and experimentation and the consumers engage in search. The consumers are called sluggish if they do not receive full price information with some positive probability. If the consumers are not sluggish at all, the classical Bertrand equilibrium can be sustained. If the consumers display sluggishness, all price above marginal cost occur with positive probability and the evolutionary process exhibits a phenomenon similar to parallel pricing: only states where the seller mark identical process can be observed with positive probability. Shifting from sluggishness to the slight sluggishness, the evolutionary process shifts from monopoly pricing to marginal cost pricing.
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homogeneous commodity
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Bertrand equilibrium
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imitation and experimentation
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sluggish consumers
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monopoly pricing
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marginal cost pricing
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