An Empirical Model of Capacity Expansion and Pricing in an Oligopoly with Barometric Price Leadership: A Case Study of the Newsprint Industry in North America
The weak form of oligopolistic coordination in pricing and capacity expansion of the North American newsprint industry is examined. A dynamic model consisting of demand, price, and regional capacity equations is estimated for the years 1965 to 1986. The reference price in the industry is hypothesized to be based on either adjusted full-cost pricing or mark-up over marginal cost pricing. Neither hypothesis was rejected, confirming that either pricing rule better describes industry practices than marginal cost pricing. The determinant of mark-up levels was the industry operating rate. The model also showed that capacity expansion was negatively related to the concentration ratio. Coauthors are V. Kanetkar, I. Vertinsky, and D. Whistler. Copyright 1991 by Blackwell Publishing Ltd.
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Volume (Year): 39 (1991)
Issue (Month): 3 (March)
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