Dynamic demand and noncompetitive intertemporal output adjustments: correction and extension

Abstract

AbstractWhile hundreds of papers study the strategic interactions of oligopolists facing sticky prices only very few treat the in my opinion more important and opposite case of sticky or sluggish demand and supply, e.g., for energy. This point was taken up in Wirl (Int J Ind Organ 28:220–229, 2010) but unfortunately, the computation of the linear Markov perfect equilibrium is wrong. The situation in energy markets following Russia’s invasion of Ukraine adds a topical element to the theoretical analysis. Application to the oil market suggests that the difference between collusion and oligopolistic competition among few (symmetric) players is small for Markov perfect linear eqilibria. This is in stark contrast to the outcome in open loop strategies.