Can industry regulators learn collusion structures from information-efficient asset markets?
AbstractThis note combines a dynamic industrial organization model, in which an industry is subject to exogenous processes of market-size and collusion structure, with a consumption-based asset pricing model for the shares in the industry’s firms. Three main findings emerge for our model under the assumption of information-efficient asset markets. First, the volatility of a firm’s share price is exclusively driven by the volatility of the industry’s market-size. Second, the volatility of a firm’s price-dividend ratio is exclusively driven by the volatility of the industry’s collusion structure whereby high (resp. low) ratios indicate less (resp. more) collusion. Third, for non-volatile collusion structures the price-dividend ratio is constant across different collusion structures.
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Bibliographic InfoArticle provided by Elsevier in its journal Economics Letters.
Volume (Year): 116 (2012)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/ecolet
Cournot interaction; Collusion; Price-dividend ratio; Consumption-based asset pricing;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
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