Efficiency and complexity of price competition among single-product vendors
Motivated by recent progress on pricing in the AI literature, we study marketplaces that contain multiple vendors offering identical or similar products and unit-demand buyers with different valuations on these vendors. The objective of each vendor is to set the price of its product to a fixed value so that its profit is maximized. The profit depends on the vendor's price itself and the total volume of buyers that find the particular price more attractive than the price of the vendor's competitors. We model the behaviour of buyers and vendors as a two-stage full-information game and study a series of questions related to the existence, efficiency (price of anarchy) and computational complexity of equilibria in this game. To overcome situations where equilibria do not exist or exist but are highly inefficient, we consider the scenario where some of the vendors are subsidized in order to keep prices low and buyers highly satisfied.
Code (0)
등록된 구현이 없습니다.
Similar Papers 제목 키워드 기반
The Impact of Designated Market Makers on Market Liquidity and Competition: A Simulation Approach
This paper conducts an empirical investigation into the effects of Designated Market Makers (DMMs) on key market quality indicators, such as liquidity, bid-ask spreads, and order fulfillment ratios. Through agent-based s…
DiversityOptimal Rebate Design: Incentives, Competition and Efficiency in Auction Markets
This study explores the design of an efficient rebate policy in auction markets, focusing on a continuous-time setting with competition among market participants. In this model, a stock exchange collects transaction fees…
Adam Smith's Theory of Value: A Reappraisal of Classical Price Discovery
The relevance of Adam Smith for understanding human morality and sociality is recognized in the growing interest in his work on moral sentiments among scholars of various academic backgrounds. But, paradoxically, Adam Sm…
The separation of market and price in some free competitions and its related solution to the over-application problem in the job market
According to common understanding, in free completion of a private product, market and price, the two main factors in the competition that leads to economic efficiency, always exist together. This paper, however, points …
Price Competition with Geometric Brownian motion in Exchange Rate Uncertainty
We analyze an operational policy for a multinational manufacturer to hedge against exchange rate uncertainties and competition. We consider a single product and single period. Because of long-lead times, the capacity inv…