Article ID Journal Published Year Pages File Type
5100093 Journal of Economic Theory 2017 12 Pages PDF
Abstract
This paper demonstrates how equilibrium involving anticipated boycotts and actual boycotts can occur, even though consumers are negligible and only care about the price they pay and the timing of purchase. The model is a two-period durable goods monopoly game with demand uncertainty. First, a “non-boycott” equilibrium is characterized. Under regularity assumptions ruling out multiplicative uncertainty, there are additional equilibria in which the firm sets a low price in period 0, based on the anticipation that consumers will boycott whenever the price exceeds a threshold. Also, the augmented game, with a publicly observed sunspot, has equilibria in which boycotts occur on the equilibrium path with positive probability.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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