Advance Production, Inventories and Market Power: An Experimental Investigation
AbstractThis paper reports an experiment conducted to assess the effects of alterations in production conditions and product durability on market power in Bertrand-Edgeworth duopolies. Experiment results indicate that advance production increases market power in the sense that mean transaction prices increase relative to static Nash equilibrium predictions for a baseline market. In a similar way, a simple inventory option reduces market power. We also find that both advance production and inventory carryover undermine a strong tendency toward tacit collusion observed in our baseline duopoly markets.
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Bibliographic InfoPaper provided by VCU School of Business, Department of Economics in its series Working Papers with number 1001.
Length: 27 pages
Date of creation: Feb 2010
Date of revision: Jan 2011
Experiments; Bertrand-Edgeworth Competition; Advance Production; Inventory Carryover;
Other versions of this item:
- Douglas D. Davis, 2013. "Advance Production, Inventories, And Market Power: An Experimental Investigation," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 941-958, 01.
- C9 - Mathematical and Quantitative Methods - - Design of Experiments
- D4 - Microeconomics - - Market Structure and Pricing
- L4 - Industrial Organization - - Antitrust Issues and Policies
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