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Strategic incentives in dynamic duopoly

AuthorsJun, B.; Vives, Xavier
Issue Date2004
CitationJournal of Economic Theory 116(2): 249-281 (2004)
AbstractWe compare steady states of open loop and locally stable Markov perfect equilibria (MPE) in a general symmetric differential game duopoly model with costs of adjustment. Strategic incentives at the MPE depend on whether an increase in the state variable of a firm hurts or helps the rival and on whether at the MPE there is intertemporal strategic substitutability or complementarity. A full characterization is provided in the linear-quadratic case. Then with price competition and costly production adjustment, static strategic complementarity turns into intertemporal strategic substitutability and the MPE steady-state outcome is more competitive than static Bertrand competition. © 2003 Elsevier Inc. All rights reserved.
Identifiersdoi: 10.1016/j.jet.2003.08.005
issn: 0022-0531
Appears in Collections:(IAE) Artículos
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