A differential game model of a market of substitutable products |
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| Authors: | David WK Yeung |
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| Institution: | School of Economics and Finance, The University of Hong Kong, Pokfulam Road, Hong Kong |
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| Abstract: | Modern industrial organization often classifies groups of differentiated products that are fairly good substitutes to belong to the same market. This paper develops a differential game model of a market of substitutable products. To avoid the problem of time-inconsistency, we solve a feedback Nash equilibrium solution for the game. A set of state-dependent equilibrium strategies is derived. Extensions of the model to a stochastic formulation and to an infinite time horizon specification are also provided. |
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| Keywords: | Game theory Dynamic programming Feedback Nash equilibrium solution |
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