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on Industrial Organization |
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Issue of 2007‒03‒31
six papers chosen by |
| By: | Jean J. GABSZEWICZ (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Didier, LAUSSEL; Tanguy, VAN YPERSELE; S, ZANAJ |
| Abstract: | This paper first introduces an approach relying on market games to examine how successive oligopolies do operate between downstream and upstream markets. This approach is then compared with the traditional analysis of oligopolistic interaction in successive markets. The market outcomes resulting from the two approaches are analysed under different technological regimes, decreasing vs constant returns |
| Keywords: | D43, L1, L13, L22 |
| Date: | 2007–03–26 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvec:2007009&r=ind |
| By: | Doraszelski, Ulrich; Satterthwaite, Mark |
| Abstract: | We provide a general model of dynamic competition in an oligopolistic industry with investment, entry, and exit. To ensure that there exists a computationally tractable Markov perfect equilibrium, we introduce firm heterogeneity in the form of randomly drawn, privately known scrap values and setup costs into the model. Our game of incomplete information always has an equilibrium in cutoff entry/exit strategies. In contrast, the existence of an equilibrium in the Ericson & Pakes (1995) model of industry dynamics requires admissibility of mixed entry/exit strategies, contrary to the assertion in their paper, that existing algorithms cannot cope with. In addition, we provide a condition on the model's primitives that ensures that the equilibrium is in pure investment strategies. Building on this basic existence result, we first show that a symmetric equilibrium exists under appropriate assumptions on the model's primitives. Second, we show that, as the distribution of the random scrap values/setup costs becomes degenerate, equilibria in cutoff entry/exit strategies converge to equilibria in mixed entry/exit strategies of the game of complete information. Finally, we provide the first example of multiple symmetric equilibria in this literature. |
| Keywords: | dynamic oligopoly; industry dynamics; Markov perfect equilibrium |
| JEL: | C73 L13 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6212&r=ind |
| By: | Alexander Boogert (School of Economics, Mathematics & Statistics, Birkbeck); Dominique Dupont |
| Abstract: | We use a supply-demand framework to model the hourly day-ahead spot price of electricity based on publicly available information. With the model we can forecast the level and the probability of a spike in the spot price de¯ned as the spot price being above a certain threshold. Several European countries have recently started publishing day-ahead forecasts of the available supply. In this paper we show potential uses of such indicators and test their forecasting power in an hourly spot price model. We conclude that a forecast of the available supply can be part of a useful indicator and discuss ways to further improve the forecasts. |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:bbk:bbkefp:0707&r=ind |
| By: | David Bartolini |
| Abstract: | We consider a three-stage game in which symmetric firms decide whether to invest in a cost-reducing technology, then they have the possibility to merge (forming coalitions), and eventually, in the third stage, a Cournot oligopoly game is played by the resulting firms (coalitions). We show that, contrary to the existing literature, the monopoly market structure may fail to form even when the number of initial firms is just three. We then introduce a weighted sharing rule and show that a situation in which all firms acquire the cost-reducing asset cannot be sustained as a Subgame Perfect Equilibrium. |
| Date: | 2007–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:esx:essedp:628&r=ind |
| By: | Bourreau, Marc; Hombert, Johan; Pouyet, Jérôme; Schutz, Nicolas |
| Abstract: | In telecommunications some operators have deployed their own networks whereas some others have not. The latter firms must purchase wholesale products from the former to be able to compete on the final market. We show that, even when network operators compete in prices and offer perfectly homogenous products on the wholesale market, that market may not be competitive. Based on our theoretical analysis, we derive some policy implications for the broadband and the mobile telephony markets. |
| Keywords: | telecommunications; upstream and downstream markets; vertical integration |
| JEL: | L13 L51 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6224&r=ind |
| By: | Joachim Wagner (University of Lueneburg and IZA) |
| Abstract: | Using panel data from Spain Farinas and Ruano (IJIO 2005) test three hypotheses from a model by Hopenhayn (Econometrica 1992): (H1) Firms that exit in year t were in t-1 less productive than firms that continue to produce in t. (H2) Firms that enter in year t are less productive than incumbent firms in year t. (H3) Surviving firms from an entry cohort were more productive than non-surviving firms from this cohort in the start year. Results for Spain support all three hypotheses. This paper replicates the study using unique newly available panel data sets for all manufacturing plants from Germany (1995-2002). Again, all three hypotheses are supported empirically. |
| Keywords: | entry, exit, productivity |
| JEL: | L11 L60 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2667&r=ind |