Balance of Power
AbstractThis Paper argues that the efficiency distribution of players in a game determines how aggressively these players interact. We formalize the idea of balance of power: players fight very inefficient players but play softly versus equally (or more) efficient players. This theory of conduct predicts that entry by new firms leads to a less aggressive outcome if it creates a balance of power. A balance of power is created if more players get technologies that are close to the most efficient technology. Using a related argument, we show that an increase in entry costs can lead to more aggressive outcomes.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4733.
Date of creation: Nov 2004
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Other versions of this item:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Deneckere, R. & Kovenock, D. & Lee, R.E., 1988.
"A Model of Price Leadership Based on Consumer Loyalty,"
Purdue University Economics Working Papers
947, Purdue University, Department of Economics.
- Deneckere, Raymond J & Kovenock, Dan & Lee, Robert, 1992. "A Model of Price Leadership Based on Consumer Loyalty," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 147-56, June.
- Kirman, A.P. & Schueller, N., 1990.
"Price Leadership And Discrimination In The European Car Market,"
90b02, Universite Aix-Marseille III.
- Kirman, Alan & Schueller, Nathalie, 1990. "Price Leadership and Discrimination in the European Car Market," Journal of Industrial Economics, Wiley Blackwell, vol. 39(1), pages 69-91, September.
- Rothschild, R., 1999. "Cartel stability when costs are heterogeneous," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 717-734, July.
- J. Tirole & E. Maskin, 1982.
"A Theory of Dynamic Oligopoly, I: Overview and Quantity Competition with Large-Fixed Costs,"
320, Massachusetts Institute of Technology (MIT), Department of Economics.
- Maskin, Eric & Tirole, Jean, 1988. "A Theory of Dynamic Oligopoly, I: Overview and Quantity Competition with Large Fixed Costs," Econometrica, Econometric Society, vol. 56(3), pages 549-69, May.
- Eric Maskin & Jean Tirole, 2010. "A Theory of Dynamic Oligopoly, 1: Overview and Quantity Competition with Large Fixed Costs," Levine's Working Paper Archive 397, David K. Levine.
- Amir, Rabah & Lambson, Val E, 2000.
"On the Effects of Entry in Cournot Markets,"
Review of Economic Studies,
Wiley Blackwell, vol. 67(2), pages 235-54, April.
- Rabah Amir & Val E. Lambson, 1998. "On the Effects of Entry in Cournot Markets," CIE Discussion Papers 1998-06, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
- AMIR, Rabah & LAMBSON, Val, 1999. "On the effects of entry in Cournot markets," CORE Discussion Papers 1999059, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Rabah Amir, 2000. "On the Effects of Entry in Cournot Markets," Econometric Society World Congress 2000 Contributed Papers 1475, Econometric Society.
- Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, November.
- Deneckere, Raymond J & Kovenock, Dan, 1992.
Review of Economic Studies,
Wiley Blackwell, vol. 59(1), pages 143-62, January.
- Rotemberg, Julio J & Saloner, Garth, 1990. "Collusive Price Leadership," Journal of Industrial Economics, Wiley Blackwell, vol. 39(1), pages 93-111, September.
- Compte, Olivier & Jenny, Frederic & Rey, Patrick, 2002.
"Capacity constraints, mergers and collusion,"
European Economic Review,
Elsevier, vol. 46(1), pages 1-29, January.
- Compte, Olivier & Jenny, François & Rey, Patrick, 2002. "Capacity Constraints, Mergers and Collusion," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
- Maskin, Eric & Tirole, Jean, 1988. "Corrigendum to 'A Theory of Dynamic Oligopoly, III, Cournot Competition' (vol. 31, no. 4)," European Economic Review, Elsevier, vol. 32(7), pages 1567-1568, September.
- Stiglitz, Joseph E., 1989. "Imperfect information in the product market," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 13, pages 769-847 Elsevier.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, June.
- Schmalensee, Richard., 1984.
"Do markets differ much?,"
1531-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Baumol, William J & Willig, Robert D, 1981. "Fixed Costs, Sunk Costs, Entry Barriers, and Sustainability of Monopoly," The Quarterly Journal of Economics, MIT Press, vol. 96(3), pages 405-31, August.
- Ravenscraft, David J, 1983. "Structure-Profit Relationships at the Line of Business and Industry Level," The Review of Economics and Statistics, MIT Press, vol. 65(1), pages 22-31, February.
- Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
- Farm, Ante & Weibull, Jorgen W, 1987. " Perfectly Flexible Pricing in a Homogeneous Market," Scandinavian Journal of Economics, Wiley Blackwell, vol. 89(4), pages 487-95.
- George J. Stigler, 1947. "The Kinky Oligopoly Demand Curve and Rigid Prices," Journal of Political Economy, University of Chicago Press, vol. 55, pages 432.
- Maskin, Eric & Tirole, Jean, 1988. "A Theory of Dynamic Oligopoly, II: Price Competition, Kinked Demand Curves, and Edgeworth Cycles," Econometrica, Econometric Society, vol. 56(3), pages 571-99, May.
- Ilir Maçi & Kresimir Zigic, 2008.
"Competition Policy and Market Leaders,"
CERGE-EI Working Papers
wp375, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.