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Price Dispersion and Learning in a Dynamic Differentiated-Goods Duopoly.

Abstract:

We study price-setting duopolists who are uncertain about the degree to which their products are perceived as differentiated. Customers' sensitivity to price differences varies over time and must be estimated from the quantities sold. The information content of these quantities increases with the price difference, so there is scope for active learning. In equilibrium, price dispersion arises in a cyclical fashion, and is most likely to be observed when customers' sensitivity to price differen...

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Journal:
RAND Journal of Economics
Volume:
34
Issue:
1
Publication date:
2003-01-01
URN:
uuid:4c43125c-c5d0-4621-bc28-e1e2aa5be39c
Local pid:
oai:economics.ouls.ox.ac.uk:12839
Language:
English

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