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

In this research, data from five major Iranian firms active in breakfast cheese business were used to determine the pricing status of Ultra Filtration (UF) cheese. Because the leader firm(firm A) claimed that in all work periods, its product was sold under the ceiling price, we decided to calculate the optimal price of each firm in four different states (according to the firm A’s claim) based on the game theory principles to verify this claim. In addition, the price in each period was predictedwith a time series approach and compared with the calculated optimal price of game theory approach. Consequently, after price calculation, the leader firm’s claim was accepted.

Keywords:

Static Game , Dynamic Game , Complete Information , Competitive Pricing , Stackelberg Game , Collusion