The Welfare Effects of Supply and Demand Frictions in a Dynamic Pricing Game

Bibliographic Data

ID9707260
AuthorsMateusz Myśliwski (NHH Norwegian School of Economics ,, corresponding author), Fabio Miessi Sanches (Sao Paulo School of Economics - FGV ,), Daniel Silva Junior (0000-0003-0909-0703, City, University of London), Sorawoot Srisuma (0000-0002-4686-474X, National University of Singapore)
Year2025
Volume135
Issue670
Pages1782-1813
Publication date2025-07-28
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (PUBLISHER • GB)
DOI10.1093/ej/ueaf008
OpenAlexW6884601932
LanguageEN
References cited66

We propose a dynamic oligopoly pricing model, in which consumers’ choices exhibit inertia and firms face costly price adjustments. The primitives of the model are estimated using scanner data from the UK butter and margarine industry. We evaluate the effects of frictions on price dynamics, profits and consumer welfare. We find that price adjustment costs are substantial and represent between 24%–34% of net margins. Our model predicts that the absence of these costs reduces persistence in prices, increases firms’ profits, but has little effect on consumer surplus. The effects of consumer inertia on prices are much more pronounced than when firms cannot adjust prices freely

Articular cartilage damage · Diafiltration · Dysgeusia · Gestational period · Hyporeflexia · Liquation · Nucleofection · Proteogenomics · TSG101 · Consumer Market Behavior and Pricing · Economics of Agriculture and Food Markets · Merger and Competition Analysis

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