Three Essays on Price Competition in Oligopoly

Three Essays on Price Competition in Oligopoly PDF Author: Shyh-Fang Ueng
Publisher:
ISBN:
Category : Competition
Languages : en
Pages : 118

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Book Description
This research investigates three issues related to the economic performance of oligopolistic markets where firms produce differentiated products and compete in prices. First of all, this dissertation uses a Markov Perfect Equilibrium approach with fixed periods of commitment of actions to answer the question of what prices a duopolists will charge in equilibrium if they produce horizontally differentiated products, move alternatingly, and compete in prices forever. It is found that firms charge prices which are higher than Nash equilibrium prices but lower than the fully collusive equilibrium prices. Also, contrasted with the Nash equilibrium of the one-shot constituent game, the firm having the significantly higher demand responsiveness to its own price always charges a lower price than the other firm does although it has higher marginal cost. The dissertation then proceeds to study whether a firm can overcome its cost disadvantage by upgrading its product over the rival's, and if so, whether there exists a profit-division which will induce the low cost firm and the high cost firm to collude and no one has an incentive to cheat. The results show that (1) the ability of upgrading the product over the rival's can allow a high cost firm to earn higher profit than a cost advantaged low cost firm; (2) there exists at least one profit-division which can sustain full collusion; and (3) in the collusive equilibrium firms enlarge their quality differences to alleviate the price tension between their products. Finally, this work investigates the welfare effect of mergers which occur in an oligopolistic industry where firms produce differentiated products. It is shown that for the merger to be socially beneficial, the number of the merging firms must be less than the total number of firms in the industry minus the ratio of the products' own elasticity to cross elasticity. The analysis indicates that the welfare effect of a merger of a specific size depends on the substitutability among products of the industry.

Three Essays on Price Competition in Oligopoly

Three Essays on Price Competition in Oligopoly PDF Author: Shyh-Fang Ueng
Publisher:
ISBN:
Category : Competition
Languages : en
Pages : 118

Get Book Here

Book Description
This research investigates three issues related to the economic performance of oligopolistic markets where firms produce differentiated products and compete in prices. First of all, this dissertation uses a Markov Perfect Equilibrium approach with fixed periods of commitment of actions to answer the question of what prices a duopolists will charge in equilibrium if they produce horizontally differentiated products, move alternatingly, and compete in prices forever. It is found that firms charge prices which are higher than Nash equilibrium prices but lower than the fully collusive equilibrium prices. Also, contrasted with the Nash equilibrium of the one-shot constituent game, the firm having the significantly higher demand responsiveness to its own price always charges a lower price than the other firm does although it has higher marginal cost. The dissertation then proceeds to study whether a firm can overcome its cost disadvantage by upgrading its product over the rival's, and if so, whether there exists a profit-division which will induce the low cost firm and the high cost firm to collude and no one has an incentive to cheat. The results show that (1) the ability of upgrading the product over the rival's can allow a high cost firm to earn higher profit than a cost advantaged low cost firm; (2) there exists at least one profit-division which can sustain full collusion; and (3) in the collusive equilibrium firms enlarge their quality differences to alleviate the price tension between their products. Finally, this work investigates the welfare effect of mergers which occur in an oligopolistic industry where firms produce differentiated products. It is shown that for the merger to be socially beneficial, the number of the merging firms must be less than the total number of firms in the industry minus the ratio of the products' own elasticity to cross elasticity. The analysis indicates that the welfare effect of a merger of a specific size depends on the substitutability among products of the industry.

Three Essays on Pricing and Dynamic Control

Three Essays on Pricing and Dynamic Control PDF Author: Hyun-soo Ahn
Publisher:
ISBN:
Category :
Languages : en
Pages : 320

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Journal of Economic Literature

Journal of Economic Literature PDF Author:
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 398

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Three Essays Applying Microeconomic Theory to International Trade Issues

Three Essays Applying Microeconomic Theory to International Trade Issues PDF Author: Nils Johan Bjorksten
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Category : Equilibrium (Economics)
Languages : en
Pages : 202

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Three Essays on Strategic Trading in Oligopolistic Economies

Three Essays on Strategic Trading in Oligopolistic Economies PDF Author: Alexei Boulatov
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ISBN:
Category :
Languages : en
Pages : 328

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Three Essays on Imperfect Competition in Agricultural Markets

Three Essays on Imperfect Competition in Agricultural Markets PDF Author: Mingxia Zhang
Publisher:
ISBN:
Category :
Languages : en
Pages : 402

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Three Essays on Antitrust and Innovation

Three Essays on Antitrust and Innovation PDF Author: Donald Karl Stockdale
Publisher:
ISBN:
Category : Antitrust law
Languages : en
Pages : 288

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Three Essays on Strategic Aspects of International Trade

Three Essays on Strategic Aspects of International Trade PDF Author: Jee-Hyeong Park
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ISBN:
Category :
Languages : en
Pages : 342

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Three Essays on Competition and Interactions PDF Author: Jaesoo Kim
Publisher:
ISBN:
Category : Competition
Languages : en
Pages : 212

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Three Essays on Cost Reducing Investment

Three Essays on Cost Reducing Investment PDF Author: Pedro Pereira
Publisher:
ISBN:
Category : Cost control
Languages : en
Pages : 242

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