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Edgeworth Price Cycles and Focal Prices: Computational Dynamic Markov Equilibria
Author(s) -
Noel Michael D.
Publication year - 2008
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1530-9134.2008.00181.x
Subject(s) - markov chain , markov perfect equilibrium , key (lock) , mathematical economics , economics , computer science , markov process , econometrics , mathematical optimization , mathematics , statistics , computer security , nash equilibrium , machine learning
Motivated by the apparent discovery of Edgeworth Cycles in many retail gasoline markets, this article extends the theory of Edgeworth Cycles along several key dimensions, including models of fluctuating marginal costs, differentiation, capacity constraints and triopoly. A computational approach to search for Markov perfect equilibria is taken. Edgeworth Cycles are found in equilibrium in many situations, and the shape of the cycles are found to carry information about underlying competitive intensity. Cycles in triopoly exhibit interesting coordination problems such as delayed starts and false starts.