SFB 303 Discussion Paper No. A - 558
Author: De Fraja, Gianni, and Indrajit Ray
Title: Slot Allocation: A Model of Competition between Firms when
Consumers Are Procedurally Rational
Abstract: We present a simple model where consumers are boundedly rational:
they cannot compare two consumption bundles; instead, they have some
fundamental preferences and a selection procedure. In this set up, we
analyse a non-cooperative game played by firms who strategically
allocate some non-differentiated services to different slots. In any
Nash equilibrium of the slot allocation game the firms choose the same
allocation. There may be multiple equilibria one of which is always to
allocate according to the consumer's taste. Finally, as the number of
firms increases, only the allocation preferred by the consumers remains
as an equilibrium which may not be the profit-maximising one.
Keywords: Bounded Rationality, Slot Allocation, Multiproduct Firms
JEL-Classification-Number: C72, D11, D21, L10
Creation-Date: September 1997
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