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 ...
Michael Greinecker's user avatar
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 ...
bajun65537's user avatar
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{\...
lunar_props's user avatar
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”. ...
Ubiquitous's user avatar
  • 16.9k
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 ...
Jesper Hybel's user avatar
  • 3,356
4 votes
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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: ...
Ubiquitous's user avatar
  • 16.9k
4 votes
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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 ...
Giskard's user avatar
  • 29.5k
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\...
Ubiquitous's user avatar
  • 16.9k
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 $...
Ubiquitous's user avatar
  • 16.9k
4 votes
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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 ...
Maarten Punt's user avatar
  • 2,375
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 "...
Bertrand's user avatar
  • 3,351
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 ...
Mike J's user avatar
  • 1,471
4 votes
Accepted

Looking for guide to Industrial Organization numerical modeling in Python

Here is a program on Cournot competition on Github: http://janboone.github.io/competition_policy_and_regulation/Collusion_Cournot/Collusion_Cournot.html It encompasses both numerical aspects and ...
BakerStreet's user avatar
  • 3,697
3 votes

Directed search with privately informed buyers and capacities

I am aware of classic models such as Kreps & Scheinkman (1983). I am also aware of Burdett, Shi & Wright (2001), but note that their buyers are ex-post symmetric as both of them have value $...
Bayesian's user avatar
  • 5,290
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 ...
Kir'Shara's user avatar
  • 104
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 ...
Fix.B.'s user avatar
  • 2,658
3 votes
Accepted

Math in Melitz and Ottaviano (2008)

hint: sum equation (2) for all i and use the definition of $Q^c$, we get an expression for $Q^c$. then, substitute this expression into (2) and solve for $q^c$.
vita nova's user avatar
  • 146
3 votes

Competition and welfare - empirical evidence

Here is a fact sheet by the OECD about the effects of competition. It is mostly concerned with growth and productivity, but also discusses the effects on poor consumers and prices. It cites a wide ...
hrrrrrr5602's user avatar
3 votes

Solving a Cournot Equilibrium, the case of Q=q1+q2, Q(q1,q2)=q1+q2

It seems to me that there is a mistake in the answer provided to you, or a rather unusual profit function is used. In any case, when we use $\pi_i = (a-bQ(q_1,q_2))q_i-c_iq_i$ as profit function, ...
Maarten Punt's user avatar
  • 2,375
3 votes

Books friendly to self-studying Industrial Organization

I would recommend the The theory of Industrial Organization and the Game Theory from Jean Tirole
1muflon1's user avatar
  • 56.4k
3 votes

Quasi concavity of utility function

Your conjecture seems to be contradicted, at least for small values of $\sigma$. You can draw the function with the following R-code: ...
Bertrand's user avatar
  • 3,351
3 votes

What is the latest thinking on the economic calculation problem?

Depends what exactly is the authors definition of “radical markets”. A predominant consensus in the economic field is that a mixed economy which relies predominantly on market form of organization but ...
1muflon1's user avatar
  • 56.4k
3 votes
Accepted

Prices set by firms are the same in a Salop circle. But why?

tl;dr: Prices are identical because firms are identical. Profits of firm $i$ depend on own price $p_i$ and on neighbors' prices $p_{i-1}$ and $p_{i+1}$. Prices are set simultaneously, therefore ...
VARulle's user avatar
  • 6,805
3 votes
Accepted

Two part tariff-income effects

In the typical textbook treatment of the two-part tariff model, income effect is ignored/assumed to be negligible. Goldman, Leland, and Sibley (1984) provided detailed comparison of optimal nonlinear ...
Herr K.'s user avatar
  • 15.4k
3 votes
Accepted

Profit-maximization for a monopoly

A monopolist maximizes profit. For me, it is usually easier to do this in the quantity space. So you rearange the demand and maximize $$\max_{Q_p,Q_r} \quad P_p(Q_p)Q_p + P_r(Q_r)Q_r - TC(Q_p+Q_r)$$ $$...
Bayesian's user avatar
  • 5,290
2 votes

Nash equilibrium of a Bertrand game with different marginal costs

I think standard in Bertrand competition with different constant marginal cost is another assumption in case of equal prices. Instead of sharing demand equally, you could assume that in case of equal ...
Bayesian's user avatar
  • 5,290
2 votes
Accepted

How to calculate the quantity of an incumbent that sets the profit of a challenger equal to 0?

Some steps are a bit unclear to me, but I would say that they are wrong. For example step 1 is wrong because the meaning of this equality is: I will set the q1 that makes the challenger do zero ...
Lex's user avatar
  • 235
2 votes

Is it possible to tell anything about market structure if I have annual price data of the industries?

That that we have linear supply and demand functions, pretty much the simplest case such that quantity supplied of good $i$ is: $$ Q_{s,i,t} = \alpha_{0,i,t} + \alpha_{1,i,t} \cdot P_{i,t}$$ and ...
BKay's user avatar
  • 16.3k
2 votes

Block pricing for different products

I am not exactly sure what you mean by "block price" and I don't know the bucket buddy. However, I feel like you are talking about what microeconomists term bundling, the practice of selling two (or ...
Bayesian's user avatar
  • 5,290

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