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The Effects of Market Structure on Industry Growth

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  • Christos Koulovatianos
  • Leonard J. Mirman

Abstract

We study the behavior of firms in an imperfectly competitive environment in which firms influence the evolution of the stock of capital equipment. Our model enables us, using analytical characterizations, to show the effect of key ingredients of dynamic competition on firm strategies and industry dynamics in addition to the usual static interaction. These effects are the static market externality (implicit in the static Cournot Equilibrium) as well as the dynamic market externality due to the effect on the market outputs of a capital stock and a dynamic externality that stems from the competition between firms for the capital stock. These strategic elements justify our conclusions, based on the study of four market structures, for the link between industrial organization and industry growth.

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File URL: http://papers.econ.ucy.ac.cy/RePEc/papers/7-2003.pdf
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Bibliographic Info

Paper provided by University of Cyprus Department of Economics in its series University of Cyprus Working Papers in Economics with number 7-2003.

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Length: 46 pages
Date of creation: Nov 2003
Date of revision:
Handle: RePEc:ucy:cypeua:7-2003

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Web page: http://www.econ.ucy.ac.cy

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Keywords: Cournot competition; oligopolistic non-cooperative dynamic games;

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  1. Dutta Prajit K. & Sundaram Rangarajan K., 1993. "How Different Can Strategic Models Be?," Journal of Economic Theory, Elsevier, vol. 60(1), pages 42-61, June.
  2. Novshek, William., 1983. "Perfectly Competitive Markets as the Limits of Cournot Markets," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 499, California Institute of Technology, Division of the Humanities and Social Sciences.
  3. Gaudet, G. & Salant, S.W., 1988. "Uniqueness Of Cournot Equilibrium: New Results From Old Methods," Cahiers de recherche, Université Laval - Département d'économique 8818, Université Laval - Département d'économique.
  4. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 62(1), pages 53-82, January.
  5. Novshek, William., 1984. "On the Existence of Cournot Equilibrium," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 517, California Institute of Technology, Division of the Humanities and Social Sciences.
  6. David Levhari & Leonard J. Mirman, 1980. "The Great Fish War: An Example Using a Dynamic Cournot-Nash Solution," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 322-334, Spring.
  7. Novshek, William, 1984. "Finding All n-Firm Cournot Equilibria," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 61-70, February.
  8. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-17, June.
  9. Dutta, Prajit K & Sundaram, Rangarajan, 1992. "Markovian Equilibrium in a Class of Stochastic Games: Existence Theorems for Discounted and Undiscounted Models," Economic Theory, Springer, Springer, vol. 2(2), pages 197-214, April.
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Citations

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Cited by:
  1. Christos Koulovatianos & Leonard J. Mirman, 2005. "The Effects of Market Structure on Industry Growth: Rivalrous Non-excludable Capital," Vienna Economics Papers, University of Vienna, Department of Economics 0501, University of Vienna, Department of Economics.
  2. Christos Koulovatianos & Leonard J. Mirman & Marc Santugini, 2011. "Investment in a Monopoly with Bayesian Learning," Cahiers de recherche 11-05, HEC Montréal, Institut d'économie appliquée.
  3. Christos Koulovatianos & Leonard J. Mirman, 2003. "R&D Investment, Market Structure, and Industry Growth ," University of Cyprus Working Papers in Economics, University of Cyprus Department of Economics 8-2003, University of Cyprus Department of Economics.

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