It takes two to tango: Equilibria in a model of sales
January 1992
Article
pp 493-510.
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We show that the Varian model of sales with more than two firms has two types of equilibria: a unique symmetric equilibrium, and a continuum of asymmetric equilibria. In contrast, the 2-firm game has a unique equilibrium that is symmetric. For the n-firm case the asymmetric equilibria imply mixed strategies that can be ranked by first-order stochastic dominance. This enables one to rule out asymmetric equilibria on economic grounds by constructing a metagame in which both firms and consumers are players. The unique subgame perfect equilibrium of this metagame is symmetric.
Keywords
Automatically Extracted Terms
- equilibrium
- lemma
- price
- proof
- equilibria
- strategy
- consumer
- point
- firm i
- model
- interval
- varian
- mass point
- lemmas
- distribution
- theorem
- randomize
- player
- subgame
- price dispersion
