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Do Other Firms Matter in Oligopolies?

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  • Haskel, Jonathan
  • Scaramozzino, Pasquale

Abstract

This 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 Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1194.

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Date of creation: Jun 1995
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Handle: RePEc:cpr:ceprdp:1194

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Related research

Keywords: Conjectural Variations; Oligopolies; Panel Data;

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Cited by:
  1. Geroski, Paul A, 1998. "An Applied Econometrician's View of Large Company Performance," CEPR Discussion Papers 1862, C.E.P.R. Discussion Papers.
  2. Aune, Finn Roar & Mohn, Klaus & Osmundsen, Petter & Rosendahl, Knut Einar, 2009. "Financial market pressures, tacit collusion and oil price formation," UiS Working Papers in Economics and Finance 2009/14, University of Stavanger.
  3. Aldaba, Rafaelita M., 2008. "Can Imports Discipline Collusive Firms? The Case of the Philippine Cement Industry," Discussion Papers DP 2008-01, Philippine Institute for Development Studies.
  4. Rafaelita M. Aldaba, 2008. "Can Imports Discipline Collusive Firms? Case of the Philippine Cement Industry," Microeconomics Working Papers 22608, East Asian Bureau of Economic Research.
  5. Campello, Murillo, 2006. "Debt financing: Does it boost or hurt firm performance in product markets?," Journal of Financial Economics, Elsevier, vol. 82(1), pages 135-172, October.
  6. Yamawaki, Hideki, 2002. "Price reactions to new competition: A study of US luxury car market, 1986-1997," International Journal of Industrial Organization, Elsevier, vol. 20(1), pages 19-39, January.
  7. Sophocles N. Brissimis & Theodora S. Kosma, 2006. "Market Conduct, Price Interdependence and Exchange Rate Pass-Through," Working Papers 51, Bank of Greece.
  8. Steven Pilloff, 1999. "Does the Presence of Big Banks Influence Competition in Local Markets?," Journal of Financial Services Research, Springer, vol. 15(3), pages 159-177, May.

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