Oblivious Equilibrium for Concentrated Industries
AbstractThis paper explores the application of oblivious equilibrium to concentrated industries. We define an extended notion of oblivious equilibrium that we call partially oblivious equilibrium (POE) that allows for there to be a set of "dominant firms'', whose firm states are always monitored by every other firm in the market. We perform computational experiments that show that POE are often close to MPE in concentrated industries with characteristics similar to real world industries even when OE are not. We derive error bounds for evaluating the performance of POE when MPE cannot be computed. Finally, we demonstrate an important trade-off facing empirical researchers between implementing an equilibrium concept that is computationally light in a richer economic model, and implementing MPE in a simpler one.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19307.
Date of creation: Aug 2013
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Find related papers by JEL classification:
- L0 - Industrial Organization - - General
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-26 (All new papers)
- NEP-CMP-2013-09-26 (Computational Economics)
- NEP-COM-2013-09-26 (Industrial Competition)
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