Excess Capacity and Collusion
AbstractIn this paper, the authors analyze a restricted class of equilibria in the dynamic model of J. P. Benoit and V. Krishna (1987) in which firms choose their scale of operation before engaging in a repeated game of price competition. Benoit and Krishna established that all firms carry excess capacity in all collusive equilibria. As the authors are interested in the relationship between excess capacity and collusion in price, they examine equilibria in which firms tacitly collude in price, but not in investment decisions. Copyright 1990 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Bibliographic InfoArticle provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 31 (1990)
Issue (Month): 3 (August)
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- Esposito, Frances Ferguson & Esposito, Louis, 1974. "Excess Capacity and Market Structure," The Review of Economics and Statistics, MIT Press, vol. 56(2), pages 188-94, May.
- Dilip Abreu & David G. Pearce & Ennio Stacchetti, 1984. "Optimal Cartel Equilibria with Imperfect Monitoring," Cowles Foundation Discussion Papers 726, Cowles Foundation for Research in Economics, Yale University.
- Mann, H Michael & Meehan, James W, Jr & Ramsay, Glen A, 1979. "Market Structure and Excess Capacity: A Look at Theory and Some Evidence," The Review of Economics and Statistics, MIT Press, vol. 61(1), pages 156-59, February.
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