A Comment On: "Revisiting Dynamic Duopoly with Consumer Switching Costs", Journal of Economic Theory
In this note, we prove that the equilibrium proposed by Padilla [1, Theorem 1] is not an equilibrium for c < c*. We then characterize a Markov Perfect Equilibrium (MPE) for all values of c and show that findings on the sustainability of tacit collusion [1, Theorem 3] are unchanged for this MPE. We further show that neither the equilibrium proposed by Padilla nor our MPE is an equilibrium if consumers are forward looking.
Eric T. Anderson, Nanda Kumar, Surendra Rajiv
Anderson, T. Eric, Nanda Kumar, and Surendra Rajiv. 2004. A Comment On: "Revisiting Dynamic Duopoly with Consumer Switching Costs". Journal of Economic Theory. 116(1): 177-186.