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Behavioral choices in a dynamic duopoly with process innovation and sticky price: Myopia versus farsightedness
Author(s) -
Zhang Fan,
Cheng Susu
Publication year - 2021
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.3263
Subject(s) - duopoly , economics , microeconomics , pareto principle , social welfare , welfare , set (abstract data type) , process (computing) , computer science , operations management , cournot competition , market economy , programming language , political science , law , operating system
This paper investigates the impacts of sticky price and behavioral choices on the operation decisions, firm's profits, and social welfare. Each player has either myopic behavior or farsighted behavior. Results show that (i) players prefer farsighted behavior, which can achieve the Pareto optimality, and (ii) when both players are farsighted, they will set a higher price but will have an insufficient‐effort problem in process innovation. Furthermore, by comparing the social welfare in four different scenarios, we find that the social welfare is the highest when both players are myopic.