Strategic Buyers and Privately Observed Prices
A model of repeated price competition with large buyers is analyzed. The sellers are allowed to oﬀer diﬀerent prices to diﬀerent buyers and the buyers act strategically. The set of subgame perfect Equilibria is investigated under public and private monitoring. With public monitoring the equilibrium set with large buyers expands relative to the standard model where each buyer is small and behaves myopically. With private monitoring, where prices are not observable to the competing sellers, the set of equilibrium payoﬀs shrinks . In the ﬁnitely repeated game with private monitoring, all sales are made by the eﬀicient seller. In the inﬁnitely repeated game this result is preserved as long as the sellers condition their prices on the public history. In contrast to the ﬁnite horizon game, the set of pure strategy equilibria expands if the sellers are allowed to condition their own past prices. Comparisons are drawn to Markovian equilibria of similar dynamic games.
Bergemann, Dirk and Välimäki, Juuso, "Strategic Buyers and Privately Observed Prices" (1999). Cowles Foundation Discussion Papers. 1486.