Title: Limit-Pricing and Learning-By-Doing: A Dynamic Game with Incomplete Information
Abstract: We study a firm's pricing/output strategy under threat of entry in a two-period game with asymmetric information, where the firm can reduce future cost through learning-by- doing. In contrast with previous literature, we show that a firm's incentive to reduce cost through higher production may not align with its incentive to signal its cost type. As a consequence, in equilibrium, the incumbent firm might distort its price upward instead of downward.
Publication Year: 2010
Publication Date: 2010-12-01
Language: en
Type: article
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Cited By Count: 4
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