APPLICATION OF GAME THEORY IN DYNAMIC COMPETITIVE PRICING WITH ONE PRICE LEADER AND N DEPENDENT FOLLOWERS

Abstract

In this research UF cheese pricing is considered and Pegah, Pak, Kaleh, Rouzaneh and Mihan firms’ data, as five main UF cheese competitive firms of Iran in breakfast cheese competitive market, is used. By using these firm’s sales data, production data and price of each ton of UF cheese in nineteen work-periods (each work-period is 6 months), their sales equations are estimated for each work-period. With the objective of minimizing the difference between each firm’s sales in each work-period and each firm’s target sales in the same work-period, optimal prices are calculated in 4 states: static games with complete information, dynamic games with complete information with one leader and four followers that decide simultaneously, dynamic games with complete information with one leader and four followers that decide simultaneously considering that Rouzaneh and Mihan firms collude in their product pricing, dynamic games with complete information with one leader and four followers considering that followers collude in their product pricing.