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Industry Structure and Pricing Over the Business Cycle

In: THE ANALYSIS OF COMPETITION POLICY AND SECTORAL REGULATION

Author

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  • Yossi Spiegel
  • Konrad Stahl

Abstract

We consider the interaction between an incumbent firm and a potential entrant, and examine how this interaction is affected by demand fluctuations. Our model gives rise to procyclical entry, prices, and price-cost margins, although the average price in the market can be countercyclical if the entrant is a first mover, and capacity utilization can be either pro- or countercyclical if the incumbent is a first mover. Moreover, our results show that entry deterrence by the incumbent firm can either amplify or dampen the effect of demand fluctuations on prices, price-cost margins, and capacity utilization.

Suggested Citation

  • Yossi Spiegel & Konrad Stahl, 2014. "Industry Structure and Pricing Over the Business Cycle," World Scientific Book Chapters, in: Martin Peitz & Yossi Spiegel (ed.), THE ANALYSIS OF COMPETITION POLICY AND SECTORAL REGULATION, chapter 5, pages 115-140, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814616362_0005
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    Citations

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    Cited by:

    1. Lambertini, Luca & Marattin, Luigi, 2021. "On prices’ cyclical behaviour in oligopolistic markets," Research in Economics, Elsevier, vol. 75(1), pages 79-86.
    2. Dachs, Bernhard & Hud, Martin & Koehler, Christian & Peters, Bettina, 2016. "Employment effects of innovations over the business cycle: Firm-level evidence from European countries," ZEW Discussion Papers 16-076, ZEW - Leibniz Centre for European Economic Research.
    3. Jael, Paul, 2014. "Full Cost, Profit and Competition," MPRA Paper 59630, University Library of Munich, Germany.
    4. Jael, Paul, 2014. "Full cost, profit et concurrence [Full cost, Profit and Competition]," MPRA Paper 64406, University Library of Munich, Germany.
    5. Jael, Paul, 2020. "A Rational Theory of Producer’s Equilibrium in Fifteen Principles," MPRA Paper 99456, University Library of Munich, Germany.

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