Price competition under linear demand and finite inventories: Contraction and approximate equilibria

Jiayang Gao, Krishnamurthy Iyer, Huseyin Topaloglu

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

We consider a multi-period price competition among multiple firms with limited inventories of substitutable products, and study two types of equilibrium: with and without recourse. Under a linear demand model, we show that an equilibrium without recourse uniquely exists. In contrast, we show an equilibrium with recourse need not exist, nor be unique. In a low-influence regime, using the equilibrium without recourse, we construct an approximate equilibrium with recourse with the same equilibrium price trajectory.

Original languageEnglish (US)
Pages (from-to)382-387
Number of pages6
JournalOperations Research Letters
Volume45
Issue number4
DOIs
StatePublished - Jul 2017
Externally publishedYes

Keywords

  • Approximate equilibrium
  • Competitive pricing
  • Contraction
  • Dynamic pricing
  • Inventory
  • Linear demand

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