Competition and Incentives
|
|
- Elwin Nelson
- 6 years ago
- Views:
Transcription
1 Competition and Incentives Lisa Fey University of Munich Klaus M. Schmidt University of Munich Carmen Thoma University of Munich ENDOGENOUS PREFERENCES AND THE BROADER EFFECTS OF COMPETITION KNAW, Amsterdam, 1-2 September 2015
2 Competition and Incentives There is a general presumption that competition induces firms and individuals to spend more effort and to engage more in innovative activities: Ample anecdotal and case study evidence (Leibenstein 1966, Bloom and van Reenen 2007) Extensive empirical IO literature finds positive or inverted U-shaped relationship between the degree of competition and measures of productivity and innovation (Gilbert 2006) But: Is this a causal relationship? Theoretical literature finds it difficult to explain this effect. Klaus M. Schmidt KNAW Amsterdam
3 Monetary Incentive Effects An increase in the degree of competition affects profits and thereby the marginal returns of investments in cost reduction and innovation. Whether this effect is positive or negative depends on subtle details of the model (Vives 2008): Cournot vs. Bertrand competition Product differentiation Barriers to entry Cost functions Firm heterogeneity, etc. There are no results that offer a robust prediction of the effects of competition. Klaus M. Schmidt KNAW Amsterdam
4 Non-Monetary Effects of Competition Hypothesis: Competition has a direct positive incentive effect that is independent of the monetary incentives it provides. Two lab experiments: Does competition affect effort (investment) choices if monetary incentives are kept constant? Is this a causal effect? Are effort choices strategic complements or substitutes? What is driving these effects? Klaus M. Schmidt KNAW Amsterdam
5 Relation to the Literature (1) Theoretical IO literature: Schumpeter (1942): Innovation requires market power. Arrow (1962): Incentives for innovation stronger with competition. Vives (2008), Schmutzler (2013): Literature is not conclusive. Contract Theory: How does competition affect the optimal incentive scheme? Hart (1983), Holmström (1982): Competition provides information. Schmidt (1997): Threat-of-liquidation effect relaxes limited liability constraint of the manager. Can be interpreted as loss aversion. Klaus M. Schmidt KNAW Amsterdam
6 Relation to the Literature (2) Empirical IO literature: Positive association between competition and innovation/productivity: Geroski (1994), Nickell (1996), Blundell et al. (1999) Inverted U-shaped relationship: Scherer (1967), Aghion et al. (2005). Aghion et al (2005): Degree of competition is endogenous, causal effects difficult to disentangle. Klaus M. Schmidt KNAW Amsterdam
7 Relation to the Literature (3) Experimental literature: Issac and Reynolds (1992): Positive effect of competition Darai et al (2010): Change from Cournot to Bertrand increases cost-reducing investments, but an increase of the number of competitors in Cournot decreases investments. Aghion et al. (2014): With step-by-step innovation competition has a positive incentive effect for firms competing neck-and-neck, but a discouraging effect on laggard firms. Experimental literature on (Tullock) contests: Oversupply of effort (Dechenaux et al., 2015), but effort decreases with number of contestants. In all of theses studies competition affects monetary incentives! Klaus M. Schmidt KNAW Amsterdam
8 Outline of the Presentation 1. Introduction 2. Experiment 1: Competition induces oversupply of effort Simultaneous effort choices Monetary incentives in equilibrium are the same in all treatments 3. Experiment 2: Effort choices are strategic complements Sequential effort choices Decision problems are identical (except for the existence of a competing person) in all treatments. 4. Conclusions Klaus M. Schmidt KNAW Amsterdam
9 2. Simultaneous Investments Experimental design: Manager has to invest effort in risky project Effort e increases probability of success: p(e) Cost of effort is monetary: c(e)=2e Klaus M. Schmidt KNAW Amsterdam
10 Treatments (1) 1) Monopoly Treatment: Manager receives a bonus if he is successful π 290 if success = B 2 e with B = 0 if no success M M M One person decision problem Optimal effort level for a risk-neutral decision maker is e=40. Klaus M. Schmidt KNAW Amsterdam
11 Treatments (2) 2) Duopoly Treatment: Two managers make effort choices simultaneously. Each manager receives a bonus depending on his own success and success of competing firm: 480 if i succeeds and j fails D D D 200 if i and j both succeed i = Bi 2 ei with Bi = 80 if i and j both fail 0 if i fails and j succeeds Strategic decision problem. π Efforts are strategic substitutes. Optimal effort level for a risk-neutral decision maker in Nash equilibrium is e=40. Klaus M. Schmidt KNAW Amsterdam
12 Treatments (3) 3) Oligopoly Treatment: Four managers make effort choices simultaneously. Each manager receives a bonus depending on his own success and successes of competing firms: 760 if i succeeds and all others fail 350 if i and one other manager succeed O O O 190 if i and two other managers succeed π = Bi 2 ei with Bi = 90 if all managers succeed 40 if i all managers fail 0 if i fails and at least one other manager succeeds Optimal effort level for a risk-neutral decision maker in Nash equilibrium is e=40. Klaus M. Schmidt KNAW Amsterdam
13 Results Result 1: In all treatments subjects invest significantly more effort than predicted by Nash equilibrium Klaus M. Schmidt KNAW Amsterdam
14 Results Klaus M. Schmidt KNAW Amsterdam
15 Results Result 1: In all treatments subjects invest significantly more effort than predicted by Nash equilibrium Result 2: (a) The average effort invested in the competition treatments in significantly higher than the average effort in the monopoly treatment. (b) The average effort in the duopoly treatment is higher than the average effort in the oligopoly treatment but the difference is not significant. Klaus M. Schmidt KNAW Amsterdam
16 Results Klaus M. Schmidt KNAW Amsterdam
17 Results Klaus M. Schmidt KNAW Amsterdam
18 Results Klaus M. Schmidt KNAW Amsterdam
19 Results Klaus M. Schmidt KNAW Amsterdam
20 Discussion 1. Strategic interaction in competition treatments: Players may have mistaken beliefs about effort choices of competitors. Efforts are strategic substitutes. To explain behavior players must believe that competitors invest almost nothing. They should learn over time that this is not the case. 2. Players may be risk averse: Competition treatments involve more risk. Risk averse players should invest less in competition treatments than in monopoly treatment. 3. Social interaction in competition treatments: Envy, inequity aversion, or reciprocity may affect behavior. Joy of winning may be higher if a subject wins against another subject than against nature. Klaus M. Schmidt KNAW Amsterdam
21 3. Sequential Investments Experimental design: Manager has to choose probability of success Duopoly Treatment: Manager 1 moves first. Manager 2 observes the effort choice of M1 and moves second. Klaus M. Schmidt KNAW Amsterdam
22 Treatments (1) 1) Sequential Duopoly Treatment (DUO-SEQ): π Manager 1 chooses effort p 1. Manager 2 observes p 1 and chooses p if i succeeds and j fails 100 if i and j both succeed = B e( p ) with B = 100 if i and j both fail 0 if i fails and j succeeds D D D i i i i i Manager 2 does not have to form beliefs about p 1 It is a dominant strategy for each manager to choose p i =40. Strategies are neither substitutes nor complements. Klaus M. Schmidt KNAW Amsterdam
23 Treatments (2) 2) Monopoly Treatment (MONO-SEQ): Manager M chooses effort e. Bonus depends on success and market conditions (mc). 200 if M succeeds and favorable mc M M M 100 if M succeeds and unfavorable mc π i = B e with B = 100 if M fails and favorable mc 0 if M fails and unfavorable mc Favorable market conditions are payoff equivalent to failure of competing manager in DUO-SEQ. Probability of favorable mc is equal to p 2 in DUO-SEQ. Decision problems in DUO-SEQ and MONO-SEQ are identical except for the presence of a competing manager. Klaus M. Schmidt KNAW Amsterdam
24 Results Result 3: (a) In both treatments subjects invest significantly more effort than predicted by dominant strategy equilibrium. (b) In the duopoly treatment the second duopolist invests 53.6 on average, which is more than the average investment of the monopolist of However, the difference is not statistically significant. Klaus M. Schmidt KNAW Amsterdam
25 Results Klaus M. Schmidt KNAW Amsterdam
26 Results Result 4: (a) The probability of success chosen by duopolist 2 depends positively on the probability chosen by duopolis 1, i.e. efforts are strategic complements. (b) The probability of success chosen by the monopolist depends negatively on the probability of unfavorable market conditions. Klaus M. Schmidt KNAW Amsterdam
27 Results Klaus M. Schmidt KNAW Amsterdam
28 Results Klaus M. Schmidt KNAW Amsterdam
29 Results Result 4: (a) The probability of success chosen by duopolist 2 depends positively on the probability chosen by duopolis 1, i.e. efforts are strategic complements. (b) The probability of success chosen by the monopolist depends negatively on the probability of unfavorable market conditions. More effort of the competitor induces a duopolist to work harder, but payoff equivalent adverse market conditions induce a monopolist to be more complacent! Klaus M. Schmidt KNAW Amsterdam
30 Conclusions 1. Competition has a causal effect on behavior that goes beyond the monetary incentives it provides. Experiment allows us to keep monetary incentives constant. Random assignment of subjects to treatments rules out self-selection effects. 2. Experiment 1 shows that competition induces additional effort. 3. Experiment 2 shows that competition turns effort choices in strategic complements. 4. So far these non-monetary effects of competition have been ignored. They may contribute to the explanation of the positive relationship between the degree of competition and measures of productivity and innovation. 5. Further research is required to pin down by which behavioral mechanisms competition affects incentives. Klaus M. Schmidt KNAW Amsterdam
Oligopoly: How do firms behave when there are only a few competitors? These firms produce all or most of their industry s output.
Topic 8 Chapter 13 Oligopoly and Monopolistic Competition Econ 203 Topic 8 page 1 Oligopoly: How do firms behave when there are only a few competitors? These firms produce all or most of their industry
More informationEconomics II - October 27, 2009 Based on H.R.Varian - Intermediate Microeconomics. A Modern Approach
Economics II - October 7, 009 Based on H.R.Varian - Intermediate Microeconomics. A Modern Approach GAME THEORY Economic agents can interact strategically in a variety of ways, and many of these have been
More informationManagerial Economics & Business Strategy Chapter 9. Basic Oligopoly Models
Managerial Economics & Business Strategy Chapter 9 Basic Oligopoly Models Overview I. Conditions for Oligopoly? II. Role of Strategic Interdependence III. Profit Maximization in Four Oligopoly Settings
More information11. Oligopoly. Literature: Pindyck and Rubinfeld, Chapter 12 Varian, Chapter 27
11. Oligopoly Literature: Pindyck and Rubinfeld, Chapter 12 Varian, Chapter 27 04.07.2017 Prof. Dr. Kerstin Schneider Chair of Public Economics and Business Taxation Microeconomics Chapter 11 Slide 1 Chapter
More information29/02/2016. Market structure II- Other types of imperfect competition. What Is Monopolistic Competition? OTHER TYPES OF IMPERFECT COMPETITION
Market structure II- Other types of imperfect competition OTHER TYPES OF IMPERFECT COMPETITION Characteristics of Monopolistic Competition Monopolistic competition is a market structure in which many firms
More informationUNIVERSITY OF CAPE COAST CAPE COAST - GHANA BASIC OLIGOPOLY MODELS
UNIVERSITY OF CAPE COAST CAPE COAST - GHANA BASIC OLIGOPOLY MODELS Overview I. Conditions for Oligopoly? II. Role of Strategic Interdependence III. Profit Maximization in Four Oligopoly Settings Sweezy
More informationOligopoly Pricing. EC 202 Lecture IV. Francesco Nava. January London School of Economics. Nava (LSE) EC 202 Lecture IV Jan / 13
Oligopoly Pricing EC 202 Lecture IV Francesco Nava London School of Economics January 2011 Nava (LSE) EC 202 Lecture IV Jan 2011 1 / 13 Summary The models of competition presented in MT explored the consequences
More informationTheory Appendix. 1 Model Setup
Theory Appendix In this appendix, we provide a stylized model based on our empirical setting to analyze the effect of competition on author behavior. The general idea is that in a market with imperfect
More informationRecall from last time. Econ 410: Micro Theory. Cournot Equilibrium. The plan for today. Comparing Cournot, Stackelberg, and Bertrand Equilibria
Slide Slide 3 Recall from last time A Nash Equilibrium occurs when: Econ 40: Micro Theory Comparing Cournot, Stackelberg, and Bertrand Equilibria Monday, December 3 rd, 007 Each firm s action is a best
More informationMicroeconomics (Oligopoly & Game, Ch 12)
Microeconomics (Oligopoly & Game, Ch 12) Lecture 17-18, (Minor 2 coverage until Lecture 18) Mar 16 & 20, 2017 CHAPTER 12 OUTLINE 12.1 Monopolistic Competition 12.2 Oligopoly 12.3 Price Competition 12.4
More informationChapter 9: Static Games and Cournot Competition
Chapter 9: Static Games and Cournot Competition Learning Objectives: Students should learn to:. The student will understand the ideas of strategic interdependence and reasoning strategically and be able
More informationOligopoly and Monopolistic Competition
Oligopoly and Monopolistic Competition Introduction Managerial Problem Airbus and Boeing are the only two manufacturers of large commercial aircrafts. If only one receives a government subsidy, how can
More informationECON 115. Industrial Organization
ECON 115 Industrial Organization 1. Cournot and Bertrand Reprised 2. First and Second Movers 3. The Stackelberg Model 4. Quantity vs. Price Competition 5. Credibility 6. Preparing for the 2 nd Midterm
More informationOligopoly. Fun and games. An oligopolist is one of a small number of producers in an industry. The industry is an oligopoly.
Oligopoly Fun and games Oligopoly An oligopolist is one of a small number of producers in an industry. The industry is an oligopoly. All oligopolists produce a standardized product. (If producers in an
More informationCost-reducing investments An experimental approach
Cost-reducing investments An experimental approach Armin Schmutzler* June 2013 Abstract: This paper summarizes and discusses some recent experimental results on cost-reducing investments. I focus on the
More informationBusiness Economics BUSINESS ECONOMICS. PAPER No. 1: MICROECONOMIC ANALYSIS MODULE No. 24: NON-COLLUSIVE OLIGOPOLY I
Subject Business Economics Paper No and Title Module No and Title Module Tag 1, Microeconomic Analysis 4, Non-Collusive Oligopoly I BSE_P1_M4 TABLE OF CONTENTS 1. Learning Outcomes. Introduction 3. Cournot
More informationIntermediate Microeconomics IMPERFECT COMPETITION BEN VAN KAMMEN, PHD PURDUE UNIVERSITY
Intermediate Microeconomics IMPERFECT COMPETITION BEN VAN KAMMEN, PHD PURDUE UNIVERSITY No, not the BCS Oligopoly: A market with few firms but more than one. Duopoly: A market with two firms. Cartel: Several
More informationChapter 14 TRADITIONAL MODELS OF IMPERFECT COMPETITION. Copyright 2005 by South-Western, a division of Thomson Learning. All rights reserved.
Chapter 14 TRADITIONAL MODELS OF IMPERFECT COMPETITION Copyright 2005 by South-Western, a division of Thomson Learning. All rights reserved. 1 Pricing Under Homogeneous Oligopoly We will assume that the
More informationIndustrial Organization. R&D and Innovation
In the Name of God Sharif University of Technology Graduate School of Management and Economics Industrial Organization 44772 (1392-93 1 st term) Dr. S. Farshad Fatemi R&D and Innovation What explains the
More informationChapter 12. Oligopoly. Oligopoly Characteristics. ) of firms Product differentiation may or may not exist ) to entry. Chapter 12 2
Chapter Oligopoly Oligopoly Characteristics ( ) of firms Product differentiation may or may not exist ( ) to entry Chapter Oligopoly Equilibrium ( ) Equilibrium Firms are doing the best they can and have
More informationEcon Microeconomic Analysis and Policy
ECON 500 Microeconomic Theory Econ 500 - Microeconomic Analysis and Policy Monopoly Monopoly A monopoly is a single firm that serves an entire market and faces the market demand curve for its output. Unlike
More informationMarket Structure. Monopolistic Oligopoly. By Asst. Prof. Kessara Thanyalakpark, Ph.D.
Market Structure Monopolistic Oligopoly By Asst. Prof. Kessara Thanyalakpark, Ph.D. Monopolistic Competition Monopolistic Characteristics A hybrid market between competitive and monopoly market Large numbers
More information14.01 Principles of Microeconomics, Fall 2007 Chia-Hui Chen November 7, Lecture 22
Monopoly. Principles of Microeconomics, Fall Chia-Hui Chen November, Lecture Monopoly Outline. Chap : Monopoly. Chap : Shift in Demand and Effect of Tax Monopoly The monopolist is the single supply-side
More informationTheories of the Firm. Demetri Kantarelis. Third Edition
Theories of the Firm Third Edition Demetri Kantarelis Publisher's website: www.inderscience.com ISBN (Print): 0-907776 - 53-1 ISBN (Online): 0907776-5*-X Copyright 2010 Inderscience Enterprises Ltd No
More informationOLIGOPOLY: Characteristics
OBJECTIVES Explain how managers of firms that operate in an oligopoly market can use strategic decision making to maintain relatively high profits Understand how the reactions of market rivals influence
More informationOligopoly and Monopolistic Competition
Oligopoly and Monopolistic Competition Introduction Managerial Problem Airbus and Boeing are the only two manufacturers of large commercial aircrafts. If only one receives a government subsidy, how can
More informationChapter 12. Oligopoly. Oligopoly Characteristics. Oligopoly Equilibrium
Chapter Oligopoly Oligopoly Characteristics Small number of firms Product differentiation may or may not eist Barriers to entry Chapter Oligopoly Equilibrium Defining Equilibrium Firms are doing the best
More informationChapter 8 Competitors and Competition
Chapter 8 Competitors and Competition Prof. Jepsen ECO 610 Lecture 4 December 6, 2012 John Wiley and Sons Competition If one firm s strategic choice adversely affects the performance of another, they are
More informationContents in Brief. Preface
Contents in Brief Preface Page v PART 1 INTRODUCTION 1 Chapter 1 Nature and Scope of Managerial Economics and Finance 3 Chapter 2 Equations, Graphs and Optimisation Techniques 21 Chapter 3 Demand, Supply
More informationEconS Oligopoly - Part 1
EconS 305 - Oligopoly - Part 1 Eric Dunaway Washington State University eric.dunaway@wsu.edu November 19, 2015 Eric Dunaway (WSU) EconS 305 - Lecture 31 November 19, 2015 1 / 32 Introduction We are now
More informationThe Causal Effects of Competition on Innovation: Experimental Evidence
The Causal Effects of Competition on Innovation: Experimental Evidence Working paper Philippe Aghion, Stefan Bechtold, Lea Cassar, and Holger Herz March 18, 2014 Abstract In this paper, we design two laboratory
More informationLecture 22. Oligopoly & Monopolistic Competition
Lecture 22. Oligopoly & Monopolistic Competition Course Evaluations on Thursday: Be sure to bring laptop, smartphone, or tablet with browser, so that you can complete your evaluation in class. Oligopoly
More informationEndogenizing the cost parameter in Cournot oligopoly
Endogenizing the cost parameter in Cournot oligopoly Stefanos Leonardos 1 and Costis Melolidakis National and Kapodistrian University of Athens Department of Mathematics, Section of Statistics & Operations
More informationChapter 6. Game Theory Two
6.8 Repeated Games A game that is played only once is called a one-shot game. Repeated games are games that are played over and over again. Repeated Game = A game in which actions are taken and payoffs
More informationPROBLEM SET 3. a) Find the pure strategy Nash Equilibrium of this game.
PROBLEM SET 3 1. The residents of Pleasantville live on Main Street, which is the only road in town. Two residents decide to set up general stores. Each can locate at any point between the beginning of
More informationCompetition and Innovation; An inverted-u Relationship
Competition and Innovation; An inverted-u Relationship by P. Aghion, N. Bloom, R. Blundell, R. Grith, P. Howitt, The Quarterly Journal of Economics (2005) 12 1 Department of Economics Ecole Polytechnique
More informationCompetition among banks. Managerial Economics MBACatólica
Fernando Branco 2006-2007 Fall Quarter Session 6 Part I Competition through price: The Bertrand oligopoly There are a few suppliers; The outputs are perfect substitutes; Marginal costs are constant and
More informationIs there a U-shaped relation between competition and investment?
University of Zurich From the SelectedWorks of Armin Schmutzler 2011 Is there a U-shaped relation between competition and investment? Armin Schmutzler, University of Zurich Dario Sacco, University of Zurich
More information! lecture 7:! competition and collusion!!
! lecture 7:! competition and collusion!! the story so far Natural monopoly: Definitions (Ideal) Pricing solutions Regulation in practice Regulation under asymmetric information Competition policy: Introduction
More information9 The optimum of Oligopoly
Microeconomics I - Lecture #9, December 1, 2008 9 The optimum of Oligopoly During previous lectures we have investigated two important forms of market structure: pure competition, where there are typically
More informationOligopoly Theory (11) Collusion
Oligopoly Theory (11) Collusion Aim of this lecture (1) To understand the idea of repeated game. (2) To understand the idea of the stability of collusion. Oligopoly Theory 1 Outline of the 11th Lecture
More informationECN 3103 INDUSTRIAL ORGANISATION
ECN 3103 INDUSTRIAL ORGANISATION 5. Game Theory Mr. Sydney Armstrong Lecturer 1 The University of Guyana 1 Semester 1, 2016 OUR PLAN Analyze Strategic price and Quantity Competition (Noncooperative Oligopolies)
More informationStrategic Substitutes and Complements. MGT 525 Competitive Strategy Kevin Williams
Strategic Substitutes and Complements MGT 525 Competitive Strategy Kevin Williams 1 Course Outline Fundamentals of Strategy Static Competition Shrimp Game Strategic Complements and Substitutes Price Competition
More informationOligopoly is a market structure in which Natural or legal barriers prevent the entry of new firms. A small number of firms compete.
15 OLIGOPOLY What Is Oligopoly? Oligopoly is a market structure in which Natural or legal barriers prevent the entry of new firms. A small number of firms compete. Oligopoly sell (but more than two) of
More informationPart II. Market power
Part II. Market power Chapter 3. Static imperfect competition Slides Industrial Organization: Markets and Strategies Paul Belleflamme and Martin Peitz Cambridge University Press 2009 Introduction to Part
More informationDepartment of Economics Fall 2003
Department of Economics Fall 00 University of California Woroch/Albouy/Tovar Economics MIDTERM ANSWERS Note that some of the answers given below delve more deeply than what would be expected on any exam.
More informationChapter 15 Oligopoly
Goldwasser AP Microeconomics Chapter 15 Oligopoly BEFORE YOU READ THE CHAPTER Summary This chapter explores oligopoly, a market structure characterized by a few firms producing a product that mayor may
More informationRevisiting the Relationship Between Competition, Patenting, and Innovation
Revisiting the Relationship Between Competition, Patenting, and Innovation Philippe Aghion,PeterHowitt, Susanne Prantl July 29, 2013 1 Introduction Boldrin and Levine (2008a) argue that patent protection
More informationProf. Wolfram Elsner Faculty of Business Studies and Economics iino Institute of Institutional and Innovation Economics. Real-World Markets
Prof. Wolfram Elsner Faculty of Business Studies and Economics iino Institute of Institutional and Innovation Economics Real-World Markets Readings for this lecture Required reading this time: Real-World
More informationThe Analysis of Competitive Markets
C H A P T E R 12 The Analysis of Competitive Markets Prepared by: Fernando & Yvonn Quijano CHAPTER 12 OUTLINE 12.1 Monopolistic Competition 12.2 Oligopoly 12.3 Price Competition 12.4 Competition versus
More informationMARKETS. Part Review. Reading Between the Lines SONY CORP. HAS CUT THE U.S. PRICE OF ITS PLAYSTATION 2
Part Review 4 FIRMS AND MARKETS Reading Between the Lines SONY CORP. HAS CUT THE U.S. PRICE OF ITS PLAYSTATION 2 On May 14, 2002 Sony announced it was cutting the cost of its PlayStation 2 by 33 percent,
More informationTextbook questions: Competitors and Competition
Competitors and Competition This chapter focuses on how market structure affects competition. It begins with a discussion of how to identify competitors, define markets, and describe the market structure.
More informationManagerial Economics Chapter 9 Practice Question
ECO 3320 Lanlan Chu Managerial Economics Chapter 9 Practice Question 1. The market for widgets consists of two firms that produce identical products. Competition in the market is such that each of the
More informationDEFINITIONS A 42. Benjamin Disraeli. I hate definitions.
DEFINITIONS I hate definitions. Benjamin Disraeli adverse selection: opportunism characterized by an informed person s benefiting from trading or otherwise contracting with a less informed person who does
More informationInformal Input Suppliers
Sergio Daga Pedro Mendi February 3, 2016 Abstract While a large number of contributions have considered how market outcomes are affected by the presence of informal producers, there is scarce empirical
More information2013 sample MC CH 15. Name: Class: Date: Multiple Choice Identify the choice that best completes the statement or answers the question.
Class: Date: 2013 sample MC CH 15 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Monopolistic competition is identified by a. many firms producing a slightly
More informationChapter 12: Limit Pricing and Entry Deterrence
Chapter 12: Limit Pricing and Entry Deterrence Learning Objectives: Students should learn to: 1. Define and give examples of predatory conduct. 2. Explain stylized facts about the entry of firms into industries.
More informationBest-response functions, best-response curves. Strategic substitutes, strategic complements. Quantity competition, price competition
Strategic Competition: An overview The economics of industry studying activities within an industry. Basic concepts from game theory Competition in the short run Best-response functions, best-response
More informationManagerial Incentives in Oligopoly: The Hicks Conjecture Revisited
Managerial Incentives in Oligopoly: The Hicks Conjecture Revisited Kaniṣka Dam Centro de Investigación y Docencia Económicas Carretera México-Toluca 3655, Mexico City, Mexico. Alejandro Robinson Division
More informationAP Microeconomics: Test 5 Study Guide
AP Microeconomics: Test 5 Study Guide Mr. Warkentin nwarkentin@wyomingseminary.org 203 Sprague Hall 2017-2018 Academic Year Directions: The purpose of this sheet is to quickly capture the topics and skills
More information1.. Consider the following multi-stage game. In the first stage an incumbent monopolist
University of California, Davis Department of Economics Time: 3 hours Reading time: 20 minutes PRELIMINARY EXAMINATION FOR THE Ph.D. DEGREE Industrial Organization June 27, 2006 Answer four of the six
More informationMarket Equilibrium, Price Floor, Price Ceiling
Porters 5 Forces: 1. Entrants sunk costs, switching costs, speed of adjustment, economies of scale, sunk costs, network effects, reputation, government restraints 2. Power of input suppliers supplier concentration,
More informationOLIGOPOLY AND DUOPOLY. Asst.. Prof. Dr. Serdar AYAN
OLIGOPOLY AND DUOPOLY Asst.. Prof. Dr. Serdar AYAN WHAT IS OLIGOPOLY? Oligopoly is a market type in which: A small number of firms compete. Natural or legal barriers prevent the entry of new firms.. WHAT
More informationContents. Concepts of Revenue I-13. About the authors I-5 Preface I-7 Syllabus I-9 Chapter-heads I-11
Contents About the authors I-5 Preface I-7 Syllabus I-9 Chapter-heads I-11 1 Concepts of Revenue 1.1 Introduction 1 1.2 Concepts of Revenue 2 1.3 Revenue curves under perfect competition 3 1.4 Revenue
More informationINTERMEDIATE MICROECONOMICS LECTURE 13 - MONOPOLISTIC COMPETITION AND OLIGOPOLY. Monopolistic Competition
13-1 INTERMEDIATE MICROECONOMICS LECTURE 13 - MONOPOLISTIC COMPETITION AND OLIGOPOLY Monopolistic Competition Pure monopoly and perfect competition are rare in the real world. Most real-world industries
More informationRevisiting the Relationship Between Competition, Patenting, and Innovation
Published as: Aghion, Philippe, Peter Howitt, and Susanne Prantl. 2013. Revisiting the Relationship Between Competition, Patenting, and Innovation. In Advances in Economics and Econometrics (Tenth World
More informationECON 115. Industrial Organization
ECON 115 Industrial Organization 1. Review of the First Midterm 2. Review of Price Discrimination, Product Differentiation & Bundling 3. Introduction to Oligopolies 4. Introduction to Game Theory and Cournot
More informationManagerial Economics
This paper has 7 pages (including the coversheet) THE UNIVERSITY OF MELBOURNE MELBOURNE BUSINESS SCHOOL Managerial Economics Dr Vivek Chaudhri Final Exam: Semester 2, 1998 Reading Time: 15 minutes Exam
More informationFinance 510 Midterm #2 Practice Questions
Finance 50 Midterm # Practice Questions ) ) Consider the following pricing game between Dell and Gateway. There are two types of demanders in the market, High and Low. High demanders value a computer at
More information14.1 Comparison of Market Structures
14.1 Comparison of Structures Chapter 14 Oligopoly 14-2 14.2 Cartels Cartel in Korea Oligopolistic firms have an incentive to collude, coordinate setting their prices or quantities, so as to increase their
More informationPrinciples of Microeconomics Assignment 8 (Chapter 10) Answer Sheet. Class Day/Time
1 Principles of Microeconomics Assignment 8 (Chapter 10) Answer Sheet Name Class Day/Time Questions of this homework are in the next few pages. Please find the answer of the questions and fill in the blanks
More informationMarket Shares of Price Setting Firms and Trade Unions. Thomas Grandner. Working Paper No. 61. December 1998
Market Shares of Price Setting Firms and Trade Unions Thomas Grandner Working Paper No. 61 December 1998 Abstract: In a unionized duopoly with price setting firms market shares in different wage determination
More informationCH short answer study questions Answer Section
CH 15-16 short answer study questions Answer Section ESSAY 1. ANS: There are a large number firms; each produces a slightly different product; firms compete on price, quality and marketing; and firms are
More information4 Effects of a change in marginal cost (Extra) α β q * 1. The reason is that this is the first-order condition for the firm's choice of quantity.
4 Effects of a change in marginal cost (Extra) Consider the same market as in the previous question. Notice that firm 1 s equilibrium profit can be written as: ( ) = π 1 q 1 * c 1 π 1 * c 1 ( ( ),q * 2
More informationJoven Liew Jia Wen Industrial Economics I Notes. What is competition?
Industrial Economics I Notes What is competition? Competition in markets is generally considered a good thing (welfare economics) Competition authorities look at whether change in market structure or firm
More informationECONOMICS. Paper 3 : Fundamentals of Microeconomic Theory Module 28 : Non collusive and Collusive model
Subject Paper No and Title Module No and Title Module Tag 3 : Fundamentals of Microeconomic Theory 28 : Non collusive and Collusive model ECO_P3_M28 TABLE OF CONTENTS 1. Learning Outcomes 2. Introduction
More informationEcon8500_Imperfect_Competition
Name: Class: Date: ID: A Econ8500_Imperfect_Competition Multiple Choice Identify the choice that best completes the statement or answers the question. 1. In the quasi-competitive model a. firms believe
More informationYasuhiko Nakamura Graduate School of Economics, Waseda University. Abstract
Bargaining over Managerial Contracts in Delegation Games: The Differentiated Goods Case Yasuhiko Nakamura Graduate School of Economics, Waseda University Abstract This paper investigates the bargaining
More informationEuropean Competition Policy, Exercisefor the Parts Covered by Prof. Dr. Freytag
European Competition Policy, Exercisefor the Parts Covered by Prof. Dr. Freytag Sebastian Spiegel LS Wirtschaftspolitik, FSU Jena Winter 2016/17 Exercise European Competition Policy 1 Market Analysis with
More informationEXAMINATION #4 VERSION C General Equilibrium and Market Power November 24, 2015
Signature: William M. Boal Printed name: EXAMINATION #4 VERSION C General Equilibrium and Market Power November 24, 2015 INSTRUCTIONS: This exam is closed-book, closed-notes. Calculators, mobile phones,
More informationAdoption of Product and Process Innovations in Differentiated Markets: The Impact of Competition
Adoption of Product and Process Innovations in Differentiated Markets: The Impact of Competition Pia Weiß Chemnitz University of Technology Abstract The paper examines the effects of the degree of competition
More informationBS2243 Lecture 9 Advertisement. Spring 2012 (Dr. Sumon Bhaumik)
BS2243 Lecture 9 Advertisement Spring 2012 (Dr. Sumon Bhaumik) Why advertise? Building brands Creating markets for new products (scope economies) Price competition / Price protection Barrier to entry Product
More informationLecture 2 OLIGOPOLY Copyright 2012 Pearson Education. All rights reserved.
Lecture 2 OLIGOPOLY 13-1 Copyright 2012 Pearson Education. All rights reserved. Chapter 13 Topics Market Structures ( A Recap). Noncooperative Oligopoly. Cournot Model. Stackelberg Model. Bertrand Model.
More informationCompetition, R&D and innovation: testing the inverted-u in a simultaneous system
Paper to be presented at the 35th DRUID Celebration Conference 2013, Barcelona, Spain, June 17-19 Competition, R&D and innovation: testing the inverted-u in a simultaneous system Michael R. Peneder Austrian
More informationStackelberg or Cournot Equilibria", Games and Economic Behavior, 2, 29-46, 1990.
Hamilton, Jonathan H., and Steven M. Slutsky, "Endogenous Timing in Duopoly Games: Stackelberg or Cournot Equilibria", Games and Economic Behavior, 2, 29-46, 1990. Kahana, Nava, "Do Multiplant Labor-Managed
More informationNetworks, Telecommunications Economics and Strategic Issues in Digital Convergence. Prof. Nicholas Economides. Spring 2006
Networks, Telecommunications Economics and Strategic Issues in Digital Convergence Prof. Nicholas Economides Spring 2006 Basic Market Structure Slides The Structure-Conduct-Performance Model Basic conditions:
More informationIndustrial Organization ( st term)
Industrial Organization 44772 (1392-93 1 st term) Oligopoly Theory Dr. S. Farshad Fatemi Graduate School of Management and Economics Sharif University of Technology September 23, 2013 1 / 19 Dr. S. Farshad
More informationMarket competition and the effectiveness of incentive pay
Market competition and the effectiveness of incentive pay Pooyan Khashabi (U. Munich), Matthias Heinz (U. Cologne), Nick Zubanov (U. Konstanz), Tobias Kretschmer (U. Munich), Guido Friebel (Goethe U. Frankfurt)
More informationDo not open this exam until told to do so. Solution
Do not open this exam until told to do so. Department of Economics College of Social and Applied Human Sciences K. Annen, Fall 003 Final (Version): Intermediate Microeconomics (ECON30) Solution Final (Version
More informationEconomics of Strategy Fifth Edition
Economics of Strategy Fifth Edition Besanko, Dranove, Shanley, and Schaefer Chapter 8 Competitors and Competition Slides by: Richard Ponarul, California State University, Chico Copyright 2010 John Wiley
More informationThe Public Option: A non-regulatory alternative to Network Neutrality
The Public Option: A non-regulatory alternative to Network Neutrality Richard Ma School of Computing National University of Singapore Joint work with Vishal Misra (Columbia University) The 2nd Workshop
More informationUC Berkeley Haas School of Business Economic Analysis for Business Decisions (EWMBA 201A) Fall 2013
UC Berkeley Haas School of Business Economic Analysis for Business Decisions (EWMBA 201A) Fall 2013 Pricing with market power and oligopolistic markets (PR 11.1-11.4 and 12.2-12.5) Module 4 Sep. 28, 2013
More informationAP Microeconomics Review Session #3 Key Terms & Concepts
The Firm, Profit, and the Costs of Production 1. Explicit vs. implicit costs 2. Short-run vs. long-run decisions 3. Fixed inputs vs. variable inputs 4. Short-run production measures: be able to calculate/graph
More informationUC Berkeley Haas School of Business Economic Analysis for Business Decisions (EWMBA 201A)
UC Berkeley Haas School of Business Economic Analysis for Business Decisions (EWMBA 201A) Monopoly and oligopoly (PR 11.1-11.4 and 12.2-12.5) Advanced pricing with market power and equilibrium oligopolistic
More informationCopyright (C) 2001 David K. Levine This document is an open textbook; you can redistribute it and/or modify it under the terms of version 1 of the
Copyright (C) 2001 David K. Levine This document is an open textbook; you can redistribute it and/or modify it under the terms of version 1 of the open text license amendment to version 2 of the GNU General
More informationBrown University ECON 1130, Intermediate Microeconomics (Mathematical) Spring 2017 Class meets Tuesdays and Thursdays, 1:00-2:30 p.m.
Brown University ECON 1130, Intermediate Microeconomics (Mathematical) Spring 2017 Class meets Tuesdays and Thursdays, 1:00-2:30 p.m. Professor: Roberto Serrano Office hours: Monday, 9:00 a.m. - 12:00
More informationLecture 3 OLIGOPOLY (CONTINUED) 13-1 Copyright 2012 Pearson Education. All rights reserved.
Lecture 3 OLIGOPOLY (CONTINUED) 13-1 Copyright 2012 Pearson Education. All rights reserved. Chapter 13 Topics Stackelberg Model. Bertrand Model. Cartels. Comparison of Collusive/cartel, Cournot, Stackelberg,
More informationHotelling s (1929) linear city. Hotelling
US Manufacturing Industries C8 Average Profit ate >7 12.1%
More informationEconometric Models of Car Market Entry Games
Econometric Models of Car Market Entry Games Bulat Sultanov 1[0000 0002 8657 6793], Railya Bahitova [0000 0002 7237 4306], and Elvira Shakirova [0000 0002 8711 4048] Bashkir State University, Ufa, Russia,
More informationEconomics 203: Intermediate Microeconomics I. Sample Final Exam 1. Instructor: Dr. Donna Feir
Last Name: First Name: Student Number: Economics 203: Intermediate Microeconomics I Sample Final Exam 1 Instructor: Dr. Donna Feir Instructions: Make sure you write your name and student number at the
More information