Sluggish consumers: An evolutionary solution to the Bertrand paradox.

DOI10.1006/GAME.2001.0902MaRDI QIDQ1864809zbMATH OpenOpenAlexFDO

Authors Burkhard Hehenkamp

Publication date 23 March 2003

Published in Games and Economic Behavior (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1006/game.2001.0902

zbMATH Keywords

Bertrand equilibriumhomogeneous commodityimitation and experimentationmarginal cost pricingmonopoly pricingsluggish consumers

Mathematics Subject Classification ID

Auctions, bargaining, bidding and selling, and other market models (91B26) Consumer behavior, demand theory (91B42)

Review text

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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Cites work

• An evolutionary model of Bertrand oligopoly
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Cited in

(8)

• Aspiration adaptation in the ultimatum minigame.
• An evolutionary model of Bertrand oligopoly
• The evolution of price competition game on complex networks
• Market share dynamics in a duopoly model with word-of-mouth communication
• CONSUMER MISTAKES IN BERTRAND GAMES
• THE DISCRETIZATION OF CONTINUUM STRATEGY SPACES
• Evolutionary consumers imply monopolies exit
• Evolution of a collusive price in a networked market

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