Dynamic Duopoly with Inattentive Firms
نویسنده
چکیده
This paper analyzes an infinite horizon dynamic duopoly with stochastic demand in which firms face planning costs. In this set-up we derive the following results. First, non-synchronized planning equilibria can only exist if products are strategic substitutes while synchronized planning equilibria can only exist if products are strategic complements. This result is in sharp contrast to the predictions obtained by models that suppose commitment power of firms. In addition, we show that for both classes of equilibria, alternating and synchronous planning, there exist multiple inattentiveness lengths that can be supported as an equilibrium.
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