Convexity and the Shapley value in Bertrand oligopoly TU-games with Shubik's demand functions

The Bertrand Oligopoly situation with Shubik's demand functions is modelled as a cooperative TU game. For that purpose two optimization problems are solved to arrive at the description of the worth of any coalition in the so-called Bertrand Oligopoly Game. Under certain circumstances, this Bertrand oligopoly game has clear affinities with the well-known notion in statistics called variance with respect to the distinct marginal costs. This Bertrand Oligopoly Game is shown to be totally balanced, but fails to be convex unless all the firms have the same marginal costs. Under the complementary circumstances, the Bertrand Oligopoly Game is shown to be convex and in addition, its Shapley value is fully determined on the basis of linearity applied to an appealing decomposition of the Bertrand Oligopoly Game into the difference between two convex games, besides two nonessential games. One of these two essential games concerns the square of one non- essential game.Bertrand Oligopoly situation, Bertrand Oligopoly Game, Convexity, Shapley Value, Total Balancedness.

Trade liberalization and environmental tax in differentiated oligopoly with consumption externalities

This paper investigates the environment tax and trade liberalization with different market structures (pure oligopoly or mixed oligopoly) juxtaposing the substitutability of the goods (homogenous goods and differentiated goods), wherein environmental damage is associated with consumption. It shows that the environmental tax in mixed oligopoly is higher than in pure oligopoly irrespective of the properties of goods. In addition, it demonstrates that when the domestic market increases its openings, the tariff reduction does not always bring positive effects on the environment in mixed oligopoly but, in pure oligopoly with homogeneous goods, the tariff reduction is bad for the environment.

Price vs. quantity in oligopoly games

Price-setting and quantity-setting oligopoly games lead to extremely dierent outcomes in the market. One natural way to address this problem is to formulate a model in which some rms use price while the remaining rms use quantity as their decision variable. We introduce a mixed oligopoly game of this type and determine its equilibria. In addition, we consider an extension of this mixed oligopoly game through which the choice of the decision variables can be endogenized. We prove the emergence of the Cournot game

Mixed oligopoly, public firm behavior, and free private entry

© 2012 Elsevier B.V. All rights reservedWe analyze a mixed oligopoly with free entry by private firms, assuming that a public firm maximizes an increasing function of output, subject to a break-even constraint. We establish an irrelevance result: whenever a mixed oligopoly is viable, then aggregate output, aggregate costs and welfare are the same with and without the public firm. However, replacing a viable mixed oligopoly with a public monopoly yields higher net welfare. Implications for privatization policy are suggested

Excessive entry in a bilateral oligopoly

In a bilateral oligopoly, Ghosh and Morita (‘Social desirability of free entry: a bilateral oligopoly analysis, 2007, IJIO) show that entry is always socially insufficient if the upstream agents have sufficiently strong bargaining power. We show that this conclusion is very much dependent on the use of “efficient bargaining” model in their analysis. Using a “right-to-manage” model, we show that, even if the upstream agents have full bargaining power, entry is excessive in a bilateral oligopoly if the cost of entry is not very high. Hence, whether the anti-competitive entry regulation is justified under bilateral oligopoly depends on the bargaining structure between the upstream and the downstream agents.Bilateral oligopoly; Excessive entry; Free entry; Insufficient entry

WELFARE LOSSES UNDER ALTERNATIVE OLIGOPOLY REGIMES: THE U.S. FOOD AND TOBACCO MANUFACTURING INDUSTRIES

This article systematically estimates the allocative efficiency losses in the U.S. food and tobacco manufacturing industries under alternative oligopoly pricing regimes using a formal model of oligopoly. Using 1987 data for 44 industries and an industry-wide oligopoly pricing scheme, these losses were estimated at approximately 3% of sales--2% in the food industries and 19% in the tobacco industries. Five additional oligopoly pricing regimes, four of which are price leaderships, are simulated and their results compared and tested relative to the industry-wide pricing regime. Findings underscore the importance of cost structure assumptions and that the impact of the type of oligopoly behavior assumed is not as dramatic when differences in demand and cost specifications are smoothed out.Food and tobacco industries, Market power, Welfare loss, Industrial Organization,

Optimal Pollution Tax in Cournot Oligopsonistic Oligopoly

Cournot oligopoly has been studied almost exclusively under the implicit assumption of perfectly competitive factor markets. However,oligopolistic firms procure often factors of production from imperfectly competitive markets. Okuguchi(1998,2000) has analyzed Cournot oligopoly under the condition of imperfectly competitive factor markets,i.e.Cournot oligopsonistic oligopoly. Some economists have analyzed the optimal pollution tax rate which maximizes the net total social surplus for Cournot oligopoly(see Barnett(1980),Baumol and Oates(1980),Levin(1985),Okuguchi and Yamazaki(1994),Simpson(1995) and Okuguchi(2003)). A general finding is that the optimal pollution tax rate may be higher,lower or equal to the marginal value of the environmental damage. In this paper I will derive a general formula for the optimal pollution tax within Cournot oligopsonistic oligopoly where both product and factor markets are imperfectly competitive. In Section 2,I will prove that there exists a unique Cournot equilibrium for oligopsonistic oligopoly,given the level of the pollution tax rate. In Section 3,I will derive the optimal pollution tax rate capitalizing on the existence result in Section 2. I will clarify economic implications of the optimal pollution tax formula for some special cases. The final Section concludesoptimal pollution tax,Cournot oligopsonistic oligopoly,environmental damage

OLIGOPOLY AND TRADE

In this chapter we present a selective analytic survey of some of the main results of trade under oligopoly. We concentrate on three topics: oligopoly as an independent determinant of trade, as illustrated by the reciprocal-markets model of Brander (1981); oligopoly as an independent rationale for government intervention, as illustrated by strategic trade and industrial policy in the third-market model of Spencer and Brander (1983); and the challenges and potential of embedding trade under oligopoly in general equilibrium as illustrated by the GOLE model of Neary (2002).GOLE (General Oligopolistic Equilibrium); reciprocal dumping; strategic trade policy.

Privatization and Government's Preference under Mixed Oligopoly: A Generalization

In this paper, we generalize Kato's (Economics Bulletin, 2008) model by allowing many private firms in the mixed oligopoly setting, rather than the mixed duopoly framework of Kato (2008). By introducing the government's preference for tax revenues into the theoretical framework of mixed oligopoly, we show that Kato's results are robust when there are many private firms. That is, as the number of private firms increases, both total output and the government's payoff in the mixed oligopoly are larger than those in the private oligopoly if and only the weight of the government's preferences on tax revenues increases and vice versa.Government's preference, social welfare, tax, privatization

Market Power and/or Efficiency: An Application to U.S. Food Processing

This article separates oligopoly-power and cost-efficiency effects of changes in industrial concentration and assesses their impact on output prices in 32 food-processing industries. Empirical results indicate that although concentration induces cost efficiency in one-third of the industries, oligopoly-power effects either dominate cost efficiency or reinforce inefficiency, resulting in higher output prices in most industries. The article also provides fresh econometric estimates of oligopoly power and economies of size for the industries in question.industrial concentration, economies of scale, industrial organization, oligopoly power, food processing, Agribusiness, Industrial Organization, Productivity Analysis, L00, L11, L13, L66,