The purpose of this study is to investigate what theory predicts about price dynamics when firms face a decline in demand for their product due to an arrival of a new substitutable product. To this end, this paper constructs a dynamic duopoly model and simulates price paths. The study...

This paper characterizes dynamic monopoly price patterns when demand declines. Declining demand is caused by the prevalence of a substitutable new product. Under an assumption that myopic consumers never buy an old product once they buy the new one, this study demonstrates a systematic property...