Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Monday, April 19, 2021

Dynamic Oligopoly Pricing with Asymmetric Information: Implications for Horizontal Mergers

Dynamic Oligopoly Pricing with Asymmetric Information: Implications for Horizontal Mergers

Andrew SweetingXuezhen Tao & Xinlu Yao

We model differentiated product pricing by firms that possess private information about serially-correlated state variables, such as their marginal costs, and can use prices to signal information to rivals. In a dynamic game, signaling can raise prices significantly above static complete information Nash levels even when the privately observed state variables are restricted to lie in narrow ranges. We calibrate our model using data from the beer industry, and we show that our model can explain changes in price levels and price dynamics after the 2008 MillerCoors joint venture.

https://lawprofessors.typepad.com/antitrustprof_blog/2021/04/dynamic-oligopoly-pricing-with-asymmetric-information-implications-for-horizontal-mergers.html

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