ARTICLE | American Economic Review | Vol.112, 2022

Abstract

We examine how strategic buyer behavior affects equilibrium outcomes in a model of dynamic price competition where sellers benefit from learning-by-doing by allowing each buyer to expect to capture a share of future buyer surplus. Many equilibria that exist when buyers consider only their immediate payoffs are eliminated when buyers expect to capture even a modest share of future surplus, and the equilibria that survive are those where long-run market competition is more likely to be preserved. Our results are relevant for antitrust policy and our approach may be useful for future analyses of dynamic competition.