2,287 research outputs found
Naked exclusion in the lab: The case of sequential contracting
In the context of the naked exclusion model of Rasmusen, Ramseyer and Wiley (1991) and Segal and Whinston (2000b), we examine whether sequential contracting is more conducive to exclusion in the lab, and whether it leads to lower exclusion costs for the incumbent, than simultaneous contracting. We find that an incumbent who proposes exclusive contracts to buyers sequentially, is better able to deter entry than an incumbent who proposes contracts simultaneously. In contrast to theory, this comes at a substantial cost for the incumbent.
On the profitability of collusion in location games
In this note we take a first step towards the analysis of collusion in markets with spatial competition, focusing on the case of pure location choices. We find that collusion can only be profitable if a coalition contains more than half of all players. This result holds for location games played in k-dimensional Euclidean space as long as consumers are distributed via atomless density functions. For competition on the unit interval, unit circle, and unit square we also derive sufficient conditions for collusion to be profitable. -- Wir untersuchen Kollusion in MƤrkten, in denen die einzige strategische Variable der Akteure ihre Ortswahl ist. FĆ¼r Spiele in k-dimensionalen Euklidischen RƤumen mit massepunktfreien Verteilungen zeigen wir, dass Kollusion nur profitabel sein kann, wenn wenigstens die HƤlfte aller Akteure kolludieren. FĆ¼r Wettbewerb auf dem Einheitsintervall, dem Einheitskreis und dem Einheitsquadrat etablieren wir hinreichende Bedingungen fĆ¼r die ProfitabilitƤt von Kollusion.
Strategic Delegation in Experimental Markets
In this experiment, we analyze strategic delegation in a Cournot duopoly. Owners can choose among two different contracts which determine their managers' salaries. One contract simply gives managers incentives to maximize firm profits, while the second contract gives an additional sales bonus. Although theory predicts the second contract to be chosen, it is only rarely chosen in the experimental markets. This behavior is rational given that managers do not play according to the subgame perfect equilibrium prediction when asymmetric contracts are given.Strategic delegation, managerial incentives, experimental economics
To commit or not to commit: Endogenous timing in experimental duopoly markets
In this paper, we experimentally investigate the extended game with action commitment of Hamilton and Slutsky (1990). In their duopoly game, firms can choose their quantities in one of two periods before the market clears. If a firm commits to a quantity in period 1 it does not know whether the other firm also commits early. By waiting until period 2, a firm can observe the other firm's period 1 action. Hamilton and Slutsky predict the emergence of endogenous Stackelberg leadership. Our data, however, does not confirm the theory. While Stackelberg equilibria are extremely rare we often observe endogenous Cournot outcomes and sometimes collusive play. This is partly driven by the fact that endogenous Stackelberg followers learn to behave in a reciprocal fashion over time, i.e., they learn to reward cooperation and to punish exploitation.duoploly, endogenous timing, experimental economics
Merger and collusion in contests
Competition in some product markets takes the form of a contest. If some firms cooperate in such markets, they must decide how to allocate effort on each of their products and whether to reduce the number of their products in the competition. We show how this decision depends on the convexity properties of the contest success function, and we characterize conditions under which cooperation is profitable. -- In vielen GĆ¼termƤrkten erfolgt der Wettbewerb zwischen Unternehmen nicht primƤr Ć¼ber Preise und Mengen, sondern Ć¼ber Verkaufsanstrengungen. Ein Beispiel hierfĆ¼r ist der Kampf um Marktanteile und Kunden in MƤrkten mit hohen Werbeaufwendungen. Wenn Unternehmen in solchen MƤrkten kooperieren, mĆ¼ssen sie entscheiden, ob sie ihre gesamte Produktpalette beibehalten und ihre Verkaufsanstrengungen auf alle Produkte verteilen (āKollusionā) oder ob sie die Anzahl ihrer Produkte reduzieren (āFusionā). Wir zeigen, daĆ diese Entscheidung von den KonvexitƤtseigenschaften der Funktion abhƤngt, die den Markterfolg eines Produkts in AbhƤngigkeit von den Verkaufsanstrengungen fĆ¼r dieses Produkt bzw. fĆ¼r die Konkurrenzprodukte bestimmt, und untersuchen die Bedingungen, in denen Kooperation in Form von āKollusionā oder āFusionā fĆ¼r die kooperierenden Unternehmen profitabel ist.Contests,merger,collusion,promotional competition,Kampf um Marktanteile,Kollusion,Fusion
Output Commitment through Product Bundling: Experimental Evidence
We analyze the impact of product bundling in experimental markets. A firm has monopoly power in one market but faces competition by a second firm in another market. We compare treatments where the monopolist can bundle its two products to treatments where it cannot, and we contrast simultaneous and sequential order of moves. Our data indicate support for the theory of product bundling, even though substantial payoff differences between players exist. With bundling and simultaneous moves, the monopolist offers the predicted number of units. When the monopolist is the Stackelberg leader, the predicted equilibrium is better attained with bundling although in theory bundling should not make a difference here. In sum: bundling works as a commitment device that enables the transfer of market power from one market to another.
Profitable horizontal mergers without cost advantages: The role of internal organization, information, and market structure
Merged firms are typically rather complex organizations. Accordingly, me rger has a more profound effect on the structure of a market than simply reducing the number of competitors. We show that this may render horizontal mergers profitable and welfare ā improving even if costs are linear. The driving force behind these results, which help to reconcile theory with various empirical findings, is the assumption that information about output decisions flows more freely within a merged firm. -- Unternehmensfusionen fĆ¼hren hƤufig zu komplexen Organisationen. Fusionen haben deshalb andere und tiefgrĆ¼ndige Wirkungen auf die Marktstruktur. Sie reduzieren nicht einfach die Zahl der Wettbewerber in einem Markt, sondern durch Fusionen entstehen Wettbewerber, die sich wegen ihrer komplexen Organisationsstruktur anders verhalten als jedes der einzelnen Unternehmen vor der Fusion. Wir zeigen in dieser Arbeit, dass horizontale Fusion von Unternehmen aus diesen GrĆ¼nden profitabel fĆ¼r die fusionierenden Unternehmen und wohlfahrtserhƶhend wirken kann, selbst dann, wenn es durch die Fusion keinerlei Kostensynergien gibt. Der SchlĆ¼ssel fĆ¼r dieses Ergebnis, das eine Theorie fĆ¼r eine Reihe von empirischen Befunden liefert, ist der verbesserte Informationsfluss zwischen Unternehmensteilen des durch die Fusion entstehenden Konzerns im Vergleich zum Informationsfluss zwischen unabhƤngigen Unternehmen.Merger,internal organizational structure,information,timing,market structure,Fusion,Organisationsstruktur,Informationsfluss,Marktstruktur
Profitable Horizontal Mergers without Cost Advantages: The Role of Internal Organization, Information, and Market Structure
Merged firms are typically rather complex organizations. Accordingly, merger has a more profound effect on the structure of a market than simply reducing the number of competitors. We show that this may render horizontal mergers profitable and welfare-improving even if costs are linear. The driving force behind these results, which help to reconcile theory with various empirical findings, is the assumption that information about output decisions flows more freely within a merged firm.Merger, internal organizational structure, information, timing, market structure
Merger in Contests
Competition in some markets is a contest. This paper studies the merger incentives in such markets. Merger can be profitable. The profitability depends on the post-merger contest st ructure, the discriminatory power of the contest and on the number of contestantsContests, merger
A new comparative approach to macroeconomic modeling and policy analysis
In the aftermath of the global financial crisis, the state of macroeconomic modeling and the use of macroeconomic models in policy analysis has come under heavy criticism. Macroeconomists in academia and policy institutions have been blamed for relying too much on a particular class of macroeconomic models. This paper proposes a comparative approach to macroeconomic policy analysis that is open to competing modeling paradigms. Macroeconomic model comparison projects have helped produce some very influential insights such as the Taylor rule. However, they have been infrequent and costly, because they require the input of many teams of researchers and multiple meetings to obtain a limited set of comparative findings. This paper provides a new approach that enables individual researchers to conduct model comparisons easily, frequently, at low cost and on a large scale. Using this approach a model archive is built that includes many well-known empirically estimated models that may be used for quantitative analysis of monetary and fiscal stabilization policies. A computational platform is created that allows straightforward comparisons of modelsā implications. Its application is illustrated by comparing different monetary and fiscal policies across selected models. Researchers can easily include new models in the data base and compare the effects of novel extensions to established benchmarks thereby fostering a comparative instead of insular approach to model development
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