17
votes
Accepted
Why do low-budget films charge the same amount at the box office as super-high budget films?
Opportunity Cost of the Seats
Once the movie is made the cost of production is sunk and irrelevant to the proper pricing of tickets. Only the marginal costs of serving an additional customer and the ...
- 16.2k
9
votes
Accepted
Can destruction be profitable?
It can be profitable for the monopolist to do so. For the conventional producer who is a price taker the profit objective function looks like this:
$$\max_{q} \Pi^c $$
where $\Pi^c = P \cdot q - C(q)$....
- 16.2k
9
votes
Accepted
Nash equilibrium of a Bertrand game with different marginal costs
Yes, there is no equilibrium in pure strategies. For any price charged by firm 2 above $c_1$, firm one could only best respond by charging the largest price that is strictly smaller. which is ...
8
votes
Books friendly to self-studying Industrial Organization
While taking Industrial Organization I remember working with:
Strategies and games: theory and practice by Dutta
Introduction to industrial organization by Cabral
Industrial organization: theory and ...
- 829
7
votes
Accepted
Monopolistic and Bertrand (Nash) Competition
The following paper compares the efficiency of the Bertrand and Cournot game in the case of product differentiation. However, their utility function is more general than the Dixit/Stiglitz case. You ...
- 1,842
7
votes
Interpretation of $\frac{\partial }{\partial p_1}Q_1(p_1, p_2)/\frac{\partial}{\partial p_2} Q_1(p_1, p_2)$
One interpretation I can offer. The demand function can be expressed as:
$$Q_1 = Q_1(p_1,p_2)$$
Let us take the total differential:
$$dQ_1 = \frac{\partial Q_1(p_1,p_2)}{\partial p_1}dp_1+\frac{\...
- 436
6
votes
Nash equilibrium of a Bertrand game with different marginal costs
It is my impression that this has been formalized under the $\varepsilon$-equilibrium concept ("epsilon-equilibrium"). It is even called "approximate-Nash" equilibrium.
Shamelessly copying from the ...
- 32.9k
6
votes
Does merger control really affect market structure?
Clifford Winston´s excellent book Government Failure versus Market Failure:
Microeconomics Policy Research and Government Performance surveys the literature on the effects of government regulation ...
- 308
6
votes
Accepted
What is the difference between Herfindahl Index and the Concentration Ratio
From the Industrial Organization by Belleflame and Petiz (Page 34/35, Chapter 2):
While the m-firm concentration ratio adds market shares of a small number of firms in the market, the so-called ...
- 142
6
votes
Can destruction be profitable?
Cannibalization
Assuming that the [near] expired goods cannot be sold at full cost anymore, offering them for sale at a significant discount (instead of destroying them) will compete with your own ...
- 488
5
votes
Accepted
Should Costs of Travel to Buy Goods be Regarded as Transaction Costs?
Since it was mentioned in an another answer let's clear this first: whether the transportation (and its time and monetary costs) should be associated with the intended consumption of the good you are ...
- 32.9k
5
votes
Accepted
Lemma 2 in Tirole and Maskin's Dynamic Oligpoly I (1988)
The monotonicity result that they prove in their lemma 1 (p. 556) is stronger than you think: it states that whenever $q>q'$, the support of $R_1(q)$ is "uniformly below" the support of $R_1(q')$. ...
- 3,212
5
votes
Literature on the effects of third-party certification on industrial dynamics?
For models of the informational role/effects of third-party certifiers on an industry, you might like to look at
Lizzeri, Alessandro (1999). “Information Revelation and Certification Intermediaries”. ...
- 16.8k
5
votes
Accepted
Salop (1979) model for labor markets
I have provided one reference where Salop (1979) is applied to labor markets:
Staiger et. al (2010) 'Is There Monopsony in the Labor Market? Evidence from a Natural Experiment' Journal of Labor ...
- 3,256
4
votes
Accepted
How can I calculate Q, P, TP from AR=20-2Q?
Here's how I would solve it :
Finding Q, P, and $\pi$
$AR = 20 - 2Q$
Know : $AR = \frac{R}{Q}$ and $R = PQ$
Therefore :
$R = 20Q - 2Q^2$
$PQ = 20Q - 2Q^2$
$\Rightarrow$ $ P = 20 - 2Q$ $\...
- 346
4
votes
BLP using micro data
Yes, the same authors Berry, Levinsohn, Pakes have written a second paper that uses both macro and micro data to estimate demand for automobiles as a function of the characteristics of the car.
"...
- 326
4
votes
Accepted
What is a good way te represent analytically two markets with different price elasticities of demand?
How about constant elasticity demand: $Q(p)=p^a$, where $a<0$?
Such functions, as their name implies, have the advantage that the price elasticity of demand is constant along their entire length:
...
- 16.8k
4
votes
Accepted
Long Run Equilibrium of Oligopolies
The 'long run' assumption is not about whether the firms already on the market are price takers (perfect competition) or oligopolists but whether entry to the market is free. If entry to the market is ...
- 28k
4
votes
Limit of this sequence // broadness of inputs
I think the appropriate discretisation should be something like
$$C_i=\left[\int_0^i\!c(i)^{1-\alpha}\,di\right]^{\frac{1}{1-\alpha}}=\lim_{I\rightarrow\infty}\left[\sum_{j=0}^{(I-1)i}\frac{1}{I}c\...
- 16.8k
4
votes
Solving a Cournot Equilibrium, the case of Q=q1+q2, Q(q1,q2)=q1+q2
First point: you write "I am struggling with the differentiating between when to use $ Q=q_1+q_2$ and $Q(q_1,q_2)=q_1+q_2$". But these are the same thing: both define $Q$ as a function of $q_1$ and $...
- 16.8k
4
votes
Accepted
Literature on the effects of third-party certification on industrial dynamics?
This is also a big theme in agriculturaland environmental economics given the amount of nutritional, healthy, organic and other labels that we see on food these days.
Here are a few references to ...
- 2,365
4
votes
Calculating Market Concentration without sales data
Why not using the number of workers? And simply replacing sales (or output) by workers in the HHI or C4 indices. I saw this in the literature, but where? May be in a report of the German "...
- 3,029
4
votes
What is the difference between personal consumption expenditure price and PCE quantity?
Personal consumption expenditure (PCE) is the primary measure of consumer spending on goods and services in the U.S. economy. It accounts for about two-thirds of domestic final spending, and thus it ...
- 1,471
3
votes
Can destruction be profitable?
Simple answer: It cost companies money to do any, even doing nothing. The immediate issues with selling out of date food in most jurisdictions would be:
Do nothing (stockpile non-perishable.)
Goods ...
- 131
3
votes
Can destruction be profitable?
In addition to BKay's answer, selling expired food opens a firm to suit. This occurs either via breach of an implied warranty (that the food is fit for consumption) or, in many jurisdictions, strict ...
- 395
3
votes
When a demand function is split, how do we algebraically change function
The Bertrand case you mention is a little special because it induces a discontinuity in the demand function. Suppose that market demand is $D(P)=1-P$, zero marginal cost, and that all consumers buy ...
- 16.8k
3
votes
Accepted
Kimball (1995) Specification of Final Good Production
Some input:
Kimball assumes a constant-returns-to-scale (CRS) production of the final good $Y$ from the intermediate goods (and no other inputs are involved in this function). Turn to discrete space ...
- 32.9k
3
votes
Firm Sizes over the business cycle
These guys (paper) claim the distribution is still power-law, but steeper in recessions and flatter in booms.
[Content added after suggestion]
While it is well known that the distribution of firm ...
- 2,628
3
votes
Why do low-budget films charge the same amount at the box office as super-high budget films?
lower production costs translate into lower sales costs
Not as such, because you're looking at the total budget for making a movie and all the copies of it needed to distribute and show it many, many ...
- 191
3
votes
Textbook for industrial organization without calculus
Luis M Cabral : Introduction to Industrial Organization :- This book has a combo of game-theory and Cost curves. It explains strategic concepts using no calculus.
However, if you want more theoretical ...
- 104
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