Do Other Firms Matter in Oligopolies?
AbstractThis paper examines how firms interact with their rivals. The main novelty of our approach is that we let conjectural variations depend on the actual ability of other firms to react, which we measure by both the physical capacity and financial status of firms. Our main findings are threefold. First, in general, spare physical capacity leads rival firms to conjecture more aggressive behaviour. Second, financial variables have a complex effect on conjectures. We interpret this as due to signalling effects being more important in some industries, and financial distress in others. Third, leader-follower interactions appear to be relevant in all of the industries considered.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1194.
Date of creation: Jun 1995
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Other versions of this item:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
- L68 - Industrial Organization - - Industry Studies: Manufacturing - - - Appliances; Furniture; Other Consumer Durables
- L73 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Forest Products
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