Edgeworth Price Cycles and Focal Prices: Computational Dynamic Markov Equilibria

33 Pages Posted: 6 May 2008

Abstract

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.

Suggested Citation

Noel, Michael D., Edgeworth Price Cycles and Focal Prices: Computational Dynamic Markov Equilibria. Journal of Economics & Management Strategy, Vol. 17, Issue 2, pp. 345-377, Summer 2008, Available at SSRN: https://ssrn.com/abstract=1128383 or http://dx.doi.org/10.1111/j.1530-9134.2008.00181.x

Michael D. Noel (Contact Author)

Texas Tech University ( email )

237 Holden Hall
Box 41014
Lubbock, TX 79407
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
1
Abstract Views
636
PlumX Metrics