Limit-Pricing and Learning-By-Doing: A Dynamic Game with Incomplete Information

We study a firm's pricing/output strategy under threat of entry in a two-period game with asymmetric information, where the firm can reduce future cost through learning-by-doing. In contrast with previous literature, we show that a firm's incentive to reduce cost through higher production may not align with its incentive to signal its cost type. As a consequence, in equilibrium, the incumbent firm might distort its price upward instead of downward.

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Year of publication:	2010
Authors:	Yang, Ke
Published in:	International Journal of Business and Economics. - College of Business, ISSN 1607-0704. - Vol. 9.2010, 3, p. 201-212
Publisher:	College of Business
Subject:	limit-pricing \| learning-by-doing \| dynamic game

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Extent:	application/pdf text/html
Type of publication:	Article
Classification:	L11 - Production, Pricing, and Market Structure Size; Size Distribution of Firms ; L12 - Monopoly; Monopolization Strategies ; L13 - Oligopoly and Other Imperfect Markets
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010598942