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Industry structure and pricing over the business cycle

Author

Listed:
  • Stahl, Konrad
  • Spiegel, Yossi

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 the first mover, and capacity utilization can be either pro- or countercyclical if the incumbent is the 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

  • Stahl, Konrad & Spiegel, Yossi, 2014. "Industry structure and pricing over the business cycle," CEPR Discussion Papers 10009, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:10009
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    References listed on IDEAS

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    Cited by:

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    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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    More about this item

    Keywords

    Business cycle; Entry; Entry deterrence; Price competition;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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