Academic literature on the topic 'Oligopoly'

This thesis deals with gathering of private information when company tries to enter on concentrated markets. Aim of the thesis is to show how much private information will company require and how is its output and profit affected by private information. Thesis uses standard optimalization tools of microeconomic analysis.

Part (I) of this thesis is on the Cournot model. Our aDn has been to collect together the known results on the Cournot model, present them in a systematic manner and derive the results from a single set of postulates. In the process we have corrected some errors, generalised some results and discovered some new ones. Part (II) is a brief review of the two main approaches to oligopoly theory: (1) the Reaction Function approach (also known as the conjectural variations approach, the classical approach or the traditional approach); (2) the game-theoretic approach, particularly the Super-Game approach of James Friedman. We show that the Reaction Function approach leads either to inconsistency, or to implausible econom1C results. We show that the Super-Game approach of James Friedman suffers from several defects, notably lack of credibility. In Part (III) we develop a new approach to oligopoly theory that avoids the difficulties of the two standard approaches. We propose a concept of credibility that promises to reduce the number of a priori possible oligopoly solutions, thus strengthening the predictive power of the theory. (

Esta tesis estudia el comportamiento estratégico de las empresas en mercados oligopolísticos y su interacción con otros agentes como compradores potenciales y autoridades públicas. En el Capítulo 2 se estudia si la distribución de recursos financieros internos hecha por el mercado de capitulos internos de un grupo industrial permite a las divisiones competir en el mercado del producto de una manera diferente a las empresas individuales. Se prueba que la subsidiación hecha por la "casa madre" no hace necesariamente la división un competidor más fuerte. Pero, la subsidiación proteger la división de un grupo industrial cuando entre en un mercado en relación con acciones estratégicas de empresas rivales ya presentes en el mercado. Se prueba que eso puede ser una ventaja para la división, pero también un coste. En fin, el mercado de capitales interno crea un ligamen financiero entre divisiones que operan en mercados totalmente dependientes y permite al grupo industrial de extender su poder monopolístico de un mercado a otro. En el Capítulo 3 se prueba que el fraccionamiento de los compradores puede impedir la entrada en un mercado donde ya es presente una empresa y el entrante potencial es más eficiente. En este caso la concentración de los compradores puede favorecer la entrada eliminando el problema de falta de coordinación. Además se estudia si existe un mecanismo que puede solucionar el problema. En el Capítulo 4 se estudian los efectos de la competencia entre naciones o regiones para la localización de una empresa multinacional. Se asume que una región (más pobre) obtiene más beneficios de la localización de la empresa. Pero la empresa prefiere localizarse en la otra región, si los incentivos ofertas son iguales. En esta situación, la competencia entre regiones a través de incentivos puede mejorar el bienestar agregado en comparación con una política que impide la oferta de incentivos porque permite a la región que más necesita la localización de la empresa de conseguirla. Además se comparan los efectos cuando, en ausencia de incentivos, la empresa exporta y cuando la empresa invierte en una de las regiones.

In this thesis, our aim is to study a Cournot tatonnement system which exhibits destabilisation of the Cournot equilibrium as the number of firms increase. Our approach is to first consider the special case of firms behaving identically in a market share attraction model in two different adjustment process: Cournot tatonnement and bounded rationality adjustment. Results from the Cournot tatonnement system shows a superstable equilibrium in two firms model and an unstable equilibrium in a five firms model. In the five firms model, we show that introducing heterogeneity stabilises the Cournot equilibrium. For both two and five firms model, the differences of costs between firms are critical for the convergence of the system to the Cournot equilibrium. Lastly, we study the effect of entries and exits of firms on the number of active firms in the market. We discover that the market can sustain between two to four firms, and the factors are differences of costs and initial outputs between firms, and barriers to entries.

La tesis contribuye a la teoría del oligopolio. Analiza la competencia en precio cuando hay interacción estratégica entre las empresas. Me interesan particularmente las situaciones en que las empresas toman otras decisiones antes de competir en precios o cantidades.<br/>El capítulo "La Publicidad, la lealtad de marca y los precios" analiza los efectos estratégicos de la publicidad persuasiva en mercados con productos homogéneos. Utiliza un modelo de competencia bidimensional en publicidad y precios. Las empresas primero invierten en publicidad con el fin de inducir lealtad de marca entre consumidores que, en la ausencia de la publicidad, comprarían la marca más barata. Después las empresas compiten en precios para los consumidores que quedan indiferentes entre las marcas existentes. En equilibrio los precios proceden de distribuciones asimétricas. La variación en las distribuciones de precios se refleja en los beneficios esperados y, como consecuencia, los gastos en publicidad de las dos empresas son asimétricos. Una empresa elige una inversión menor en publicidad, mientras las otras eligen el mismo nivel, más alto de inversión. Por este perfil de inversiones, hay una familia de equilibrios de precio con al menos dos empresas utilizando estrategias mixtas. El modelo propone una manera de modelar mercados con productos homogéneos donde la publicidad genera diferenciación sujetiva y cambia la naturaleza de la competencia en precios.<br/>El capítulo "¿Es la venta conjunta anticompetitiva?" analiza las consecuencias de la venta conjunta sobre los precios en un mercado con productos complementarios. Tramite un modelo de competencia imperfecta con diferenciación espacial, identifica los incentivos para elegir la venta conjunto de complementos, por dos tipos de función de demanda, y se estudia como cambian con el número de complementos. Con una demanda inelástica, la venta conjunta proporciona una ventaja frente a competidores que venden componentes separados. Además, los competidores no pueden mejorar su situación a través de la venta conjunta. Con una demanda elástica, los incentivos para venta conjunta son mayores, y cuando existen, el resultado del mercado es venta conjunta simétrica - el más competitivo. El análisis del bienestar muestra que los incentivos para venta conjunta son excesivos. Sin embargo, la venta conjunta simétrica genera un excedente del consumidor mayor y beneficios menores que la venta conjunta asimétrica (el resultado del mercado con una demanda inelástica). El potencial anticompetitivo de la venta conjunta es particularmente sensitivo a la elasticidad de la demanda.<br/>El capítulo "La innovación en un modelo asimétrico: Comparando los equilibrios de Cournot y Bertrand" compara los resultados de mercado y la eficiencia dinámica de dos tipos de equilibrios en un duopolio diferenciado con bienes sustitutivos, en que solo una empresa puede reducir su coste marginal antes de competir en el mercado. Se muestra que, si la diferenciación es baja y los costes de I&D bajos: (i) la innovación puede ser mayor cuando las empresas compiten en precios si la difusión es baja; (ii) la cantidad producida, el excedente del consumidor y el excedente total pueden ser mayores cuando las empresas compiten en cantidades y la difusión es alta. Un nuevo resultado de este análisis es que, con reducción de coste, tanto los consumidores como los productores pueden estar mejor cuando se compite en cantidades. Se presentan ejemplos numéricos que muestran que estos resultados no dependen de la asimetría del modelo. Se identifica también una equivalencia de parámetros que extiende los resultados a modelos con innovación de la calidad. En efecto, los incentivos para mejorar la calidad pueden ser mayores cuando las empresas compiten en precios, si la diferenciación es baja.<br>My Ph.D. Thesis is intended as a contribution to oligopoly theory. It deals with the analysis of price competition when there is strategic interaction amongst firms. I am especially interested in situations where product market competition is preceded by another strategic decision.<br/>In the chapter entitled "Advertising, Brand Loyalty and Pricing", I study the strategic effect of persuasive advertising in homogenous product markets. For this purpose, I construct a model of two-dimensional competition in non-price advertising and prices. Firms, first, invest in advertising in order to induce brand loyalty within consumers who otherwise would purchase the cheapest alternative on the market. Then, they compete in prices for the remaining brand indifferent consumers. I define the outcome of this two-stage game and show that firms invest a positive amount in advertising and prices exhibit dispersion being random draws from asymmetric distributions. The variation in the price distributions is reflected by the expected profits and, in consequence, the advertising levels chosen by the firms are asymmetric. There is one firm choosing a lower advertising level while the remaining firms choose the same higher advertising. Given this profile of advertising expenditure, there are a family of pricing equilibria with at least two firms randomising on prices. The setting suggests a way of modelling homogenous product markets where persuasive advertising creates subjective product differentiation and changes the nature of subsequent price competition.<br/>In "Is Bundling Anticompetitive?", I analyse the implications of bundling on price competition, in a market with complementary products. Using a model of imperfect competition with spatial product differentiation, I identify the incentives to bundle for two types of demand functions and study how they change with the size of the bundle. With an inelastic demand, bundling creates an advantage over uncoordinated rivals (selling separate complementary components). Moreover, the rivals cannot improve by bundling. I show that this no longer holds with an elastic demand. The incentives to bundle are stronger and, whenever they exist, the market outcome is symmetric bundling, the most competitive one. I perform the related welfare analysis and show that the incentives to bundle are socially excessive. However, bundle against bundle competition (the market outcome with an elastic demand) generates higher consumer surplus and lower profits than bundle against component competition (the market outcome with inelastic demand). This analysis shows that the potential anticompetitiveness of bundling is particularly sensitive to the price elasticity of the demand function.<br/>The last chapter is "Innovation in an Asymmetric Setting: Comparing Cournot and Bertrand Equilibria", a joint work with Ugur Akgun. This paper compares the outcomes and the dynamic efficiency of Cournot and Bertrand equilibria in a differentiated duopoly with substitute goods, where only one firm can reduce marginal cost before product market competition. We show that, with high substitutability and low innovation costs: <br/>-R&D levels can be higher under price competition if spillovers are low;<br/>-output, consumer surplus and total welfare can be larger under Cournot if spillovers are high.<br/>A new result of this article is that with process innovation, both consumers and producers can be better off under quantity competition. We provide well-defined numeric examples showing that these findings do not depend on the asymmetry of the model.

The thesis contains 5 independent papers together with an introduction and a general conclusion. All five papers consider private information in simple oligopoly models with linear demand and cost functions. The problem to be analysed is the extend to which private information is transmitted between firms and the consequences thereof. In principle the transmission (or dissemination) can take place voluntarily or involuntarily. In the case of voluntary information transmission (or sharing) we assume that this is done honestly. One of the main results in this strand of the literature is that firms have no incentives to share information unless they can collude over strategies. In chapter II and III we show that this conclusion is not generally true. In chapter II we consider the incentive for risk-averse firms to share their private information. We show that the assumption of risk-aversion in some cases reverse the conclusion in the literature. In chapter III we show that there are cases in which private information and the sharing thereof within a collusive arrangement prove detrimental to the size of a stable collusive arrangement. Thus in some cases private information imply a disincentive to collude. Chapter IV and V looks at the effect of uncertainty and private information on a two-stage duopoly model in which firms first choose capacity, then compete over prices. In chapter IV we show that no pure strategy equilibrium exists regardless of whether uncertainty is resolved before or after capacity is chosen. A mixed strategy equilibrium is shown to exist, and the equilibrium is worked out for a specific distribution of the random variable. In chapter V we modify the equilibrium concept by imposing a no-mill-price-undercutting rule. We shown that if firms' capacities differ, the firm with the highest capacity endogeneously sets the higher price. Examples of private-asymmetric information are considered and the main finding from the examples are that there are cases where neither firm wants to share the information of the best informed. Chapter VI which is joint work with Norman J. Ireland considers involuntary information transmission via output plans. This allows us to rationalise positive consistent conjectures in a simple oligopoly model. General for all the models considered is that the results not only differ from those found under certainty, but also that the results are possibly non-robust, especially with regards to changes in information structures and functional forms.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 1987.<br>Title as it appeared in the Massachusetts Institute of Technology Graduate List, June 1987: Differential game models of oligopoly.<br>Bibliography: leaves 242-249.<br>by Marco Hanig.<br>Ph.D.

Lo scopo di questa tesi `e di analizzare la presenza di una struttura sociale di preferenze interdipendenti in un oligopolio di Cournot. Per fare ci`o, in- troduciamo un gioco in cui la rete di interazioni si riflette nelle funzioni di utilit`a delle imprese. Considerando le preferenze interdipendenti, possiamo identificare un ulteriore canale di interazione tra le imprese, parallelamente all’ interazione di mercato, che stabilisce un’altra interazione, possibilmente locale o anche una forma di interazione one-to-one. La modellizzazione proposta si rivela adatta per estendere i risultati sull’esistenza e unicit`a dell’equilibrio di Nash per modelli oligopolistici Cournotiani senza preferenze interdipendenti. Studiamo il ruolo dell’interdipendenza delle preferenze sulle risultanti pro- priet`a dell’equilibrio di Nash, in termini di sostituibilit`a/complementarit`a strategica. Caratterizziamo, inoltre, l’equilibrio di Nash attraverso i due canali di in- terazione tra imprese. Ci`o che emerge `e quindi il primato della sfera so- ciale su quella economica in particolari strutture economiche (es. oligopoli Cournotiani) con preferenze interdipendenti. La caratterizzazione dell’equilibrio, il conseguente grado di competitivit`a derivante dall’interdipendenza delle preferenze sociali e la statica comparata possono essere tutte espresse in termini di misure che descrivono le propriet`a del network. La statica comparativa ci consente di capire sia come un cambiamento nella struttura di interazione sociale di un singolo giocatore influenzi il risultato del giocatore stesso, in termini di aumento/diminuzione della sua quota di mercato, sia come un cambiamento nella struttura dell’interazione nel suo insieme influisca sul risultato collettivo, in termini di aumento/diminuzione dei profitti.<br>The aim of this thesis is to analyze the presence of a structure of social in- teredependent preferences in a Cournot oligopoly. To do this, we introduce a game in which the network of interactions reflects on the utility functions of firms. Cconsidering interdependent preferences, we can identify an ad- ditional channel of interaction among firms, along with the usual market interaction that establish another, possibly local or even one-to-one form of interaction. The proposed modelling approach proves to be suitable to extend the re- sults about existence and uniqueness of the Nash equilibrium for Cournotian oligopoly models without interdependent preferences. We study the role of preference interdependence on the resulting properties of the Nash equilibrium of any game, in terms of strategic substitutabil- ity/complementarity. We characterize the Nash equilibrium through the two channels of interac- tion among firms. What emerges is then the primacy of the social sphere over the economic one in particular economic structures (i.e. Cournotian oligopolies) with interdependent preferences. The characterization of the equilibrium, the resulting degree of competitive- ness arising from the interdependence of social preferences and the compar- ative statics can be all expressed in terms of measures that describe the network properties. Comparative statics allows us to understand both how a change in the social interaction structure of a single player influences the outcome of the player itself, in terms of increased/decreased market share, and how a change in the interaction structure as a whole affects the collective outcome, in terms of increased/decreased profits.