Dynamic Price Dispersion of Seasonal Goods in Bertrand–Edgeworth Competition

Niloofar Fadavi


The primary distinguishing characteristics of various revenue management systems include fixed capacities, uniform products, and customers' sensitivity to pricing when making purchase decisions. Even with only two or three competitors, the competition remains intense. This study examines the sub-game perfect Nash equilibrium of price competition within an oligopoly market where goods are perishable assets. Each seller possesses a single unit of a non-replenishable good and competes by setting prices to sell their inventory over a finite sales period. Each period, buyers seek to purchase one unit of the good, and the number of buyers entering is random. All sellers' prices are visible to buyers, and there is no cost associated with searching for goods. Through stochastic dynamic programming methods, sellers' optimal responses can be determined by treating the competition as a one-time price-setting game, considering the remaining sales periods and the current demand pattern. Assuming a binary demand model, it is demonstrated that the duopoly model exhibits a unique Nash equilibrium. In addition, it is shown that the oligopoly model does not result in price dispersion based on a discussed metric. Moreover, when a generalized demand model is considered, the duopoly model features a unique Nash equilibrium with mixed strategies, whereas the oligopoly model exhibits a unique symmetric Nash equilibrium with mixed strategies.

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DOI: https://doi.org/10.11114/aef.v11i2.6898


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Applied Economics and Finance    ISSN 2332-7294 (Print)   ISSN 2332-7308 (Online)

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