Book contents
- Frontmatter
- 1 Auction theory
- 2 Game-theoretic analyses of trading processes
- 3 The theory of contracts
- 4 Battles for market share: incomplete information, aggressive strategic pricing, and competitive dynamics
- 5 A sequential strategic theory of bargaining
- 6 On the complexity of linear programming
- 7 Laboratory experimentation in economics
- 8 Increasing returns and the theory of international trade
- 9 Strategic aspects of trade policy
- 10 Equilibrium without an auctioneer
- 11 Arrow-Debreu programs as microfoundations of macroeconomics
4 - Battles for market share: incomplete information, aggressive strategic pricing, and competitive dynamics
Published online by Cambridge University Press: 05 January 2013
- Frontmatter
- 1 Auction theory
- 2 Game-theoretic analyses of trading processes
- 3 The theory of contracts
- 4 Battles for market share: incomplete information, aggressive strategic pricing, and competitive dynamics
- 5 A sequential strategic theory of bargaining
- 6 On the complexity of linear programming
- 7 Laboratory experimentation in economics
- 8 Increasing returns and the theory of international trade
- 9 Strategic aspects of trade policy
- 10 Equilibrium without an auctioneer
- 11 Arrow-Debreu programs as microfoundations of macroeconomics
Summary
In the last five years, economists have begun to apply the theory of games of incomplete information in extensive form to problems of industrial competition. As a result, we are beginning to get a theoretical handle on some aspects of the rich variety of behavior that marks real strategic interactions but that has previously resisted analysis. For example, the only theoretically consistent analyses of predatory pricing available five years ago indicated that such behavior was pointless and should be presumed to be rare; now we have several distinct models pointing in the opposite direction. These not only formalize and justify arguments for predation that had previously been put forward by business people, lawyers, and students of industrial practice; they also provide subtle new insights that call into question both prevailing public policy and legal standards and various suggestions for their reform. In a similar fashion, we now have models offering strategic, information-based explanations for such phenomena as price wars, the use of apparently uninformative advertising, limit pricing, patterns of implicit cooperation and collusion, the breakdown of bargaining and delays of agreement, the use of warranties and service contracts, the form of pricing chosen by oligopolists, the nature of contracts between suppliers and customers, and the adoption of various institutions for exchange: almost all of this was unavailable five years ago.
- Type
- Chapter
- Information
- Advances in Economic TheoryFifth World Congress, pp. 157 - 196Publisher: Cambridge University PressPrint publication year: 1987
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