SATISFICING AND PRIOR‐FREE OPTIMALITY IN PRICE COMPETITION

C-Tier
Journal: Economic Inquiry
Year: 2012
Volume: 50
Issue: 2
Pages: 470-483

Score contribution per author:

0.335 = (α=2.01 / 3 authors) × 0.5x C-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We apply a model of satisficing to oligopoly markets with price competition. Sellers have profit aspirations reflecting their conjectures about their competitors' behavior and search for a price guaranteeing these aspirations. Because it seems implausible that people have detailed priors on the others' actions, we postulate that sellers entertain multiple conjectures to which no probabilities can be assigned. This allows us to propose a theory of “prior‐free” optimality and to examine experimentally whether people comply with it. We find that decision makers have difficulties in making prior‐free optimal choices. Most are content to just satisfice, although ways to aspire to more ambitious profits were obviously available. (JEL C92, C72, D43)

Technical Details

RePEc Handle
repec:bla:ecinqu:v:50:y:2012:i:2:p:470-483
Journal Field
General
Author Count
3
Added to Database
2026-01-25