Citation

Discussion Paper Details

Please find the details for DP1744 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Price Dynamics and Consumer Learning

Author(s): Ramon Caminal and Xavier Vives

Publication Date: November 1997

Keyword(s): Learning, Market Shares and oligopoly pricing

Programme Area(s): Industrial Organization

Abstract: This paper studies the price dynamics induced by strategic firm behaviour in the presence of consumer learning about the uncertain quality differential of the products offered by a duopoly. It is found that consumers learn slowly and also that prices converge slowly to full-information levels. A consequence is that the incentives of firms to manipulate consumers? beliefs are relatively persistent. Although pricing tends to be aggressive at the early stages, and average prices eventually increase over time, price wars may occur at intermediate stages of the product life-cycle.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1744

Bibliographic Reference

Caminal, R and Vives, X. 1997. 'Price Dynamics and Consumer Learning'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1744