Price Competition, Fluctuations, and Welfare Guarantees
Moshe Babaioff, Renato Paes Leme, Balasubramanian Sivan

TL;DR
This paper analyzes price competition models where price fluctuations prevent equilibrium, providing welfare guarantees based on sellers' market power and highlighting the impact of information accuracy on welfare outcomes.
Contribution
It introduces a model of price competition with non-existent equilibria, offering welfare guarantees and quantifying the effects of market power and information accuracy.
Findings
Welfare remains high after initial rounds despite non-convergence.
Welfare ratio depends on the maximum market share of a seller and the total number of items.
Accurate buyer valuation information significantly improves welfare outcomes.
Abstract
In various markets where sellers compete in price, price oscillations are observed rather than convergence to equilibrium. Such fluctuations have been empirically observed in the retail market for gasoline, in airline pricing and in the online sale of consumer goods. Motivated by this, we study a model of price competition in which an equilibrium rarely exists. We seek to analyze the welfare, despite the nonexistence of an equilibrium, and present welfare guarantees as a function of the market power of the sellers. We first study best response dynamics in markets with sellers that provide a homogeneous good, and show that except for a modest number of initial rounds, the welfare is guaranteed to be high. We consider two variations: in the first the sellers have full information about the valuation of the buyer. Here we show that if there are items available across all sellers and…
Peer Reviews
No public reviews on file for this paper yet. If you reviewed it on a platform where reviews are public (OpenReview, ICLR, NeurIPS, ICML), you can paste yours below so the community can read it here.
Videos
No videos yet. Explain this paper in a talk, walkthrough, or lecture? Add one.
Taxonomy
TopicsGame Theory and Applications · Auction Theory and Applications · Consumer Market Behavior and Pricing
