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on Industrial Organization |
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Issue of 2007‒07‒27
two papers chosen by |
| By: | Henrik Orzen (University of Nottingham) |
| Abstract: | Recent theoretical research on oligopolistic competition suggests that under certain conditions prices increase with the number of competing firms. However, this counterintuitive result is based on comparative-static analyses which neglect the importance of dynamic strategies in naturally-occurring markets. When firms compete repeatedly, supra-competitive prices can become sustainable but this is arguably more difficult when more firms operate in the market. This paper reports the results of laboratory experiments investigating pricing behavior in a setting in which (static) theory predicts the counterintuitive number effect. Under a random matching protocol, which retains much of the one-shot nature of the model, the data corroborates the gametheoretic prediction. Under fixed matching duopolists post substantially higher prices, whereas prices in quadropolies remain very similar. As a result, the predicted effect is no longer observed, and towards the end the reverse effect is observed. |
| Keywords: | Market Concentration; Experiments; Tacit Collusion |
| JEL: | C72 C92 D43 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:cdx:dpaper:2006-22&r=ind |
| By: | Hao Tan; John A. Mathews |
| Abstract: | In this paper we offer a procedure to identify the industry cycles, and apply the procedure to the industrial data of three industries, namely semiconductors, PCs and FPDs. The identified cycles enable us to conduct two comparison analyses: (1) comparing the cycles with those suggested by industry experts in the corresponding industries; (2) comparing the industry cycles across the three industries. Moreover, we examine the factors possibly contributing to the cyclical dynamics of the industries built on three lines of explanations in the literature. Our vector auto regression (VAR) models establish that the dynamics of aggregate economy and capacity are among the most significant drivers in our semiconductor industry cycle. |
| Keywords: | Industry cycle; business cycle; technology cycle; business dynamics; VAR model |
| JEL: | L60 L63 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:aal:abbswp:07-07&r=ind |