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Testing dynamic oligopolistic interaction: evidence from the semiconductor industry

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  • Zulehner, Christine

Abstract

This paper analyzes the impact of a dynamic specification on the estimation of the conduct parameter in an oligopolistic market. Various empirical studies have shown that in the semiconductor industry, in particular in the Dynamic Random Access Memory (DRAM) market, one has to account for dynamic elements as learning-by-doing within firms and learning spillovers among them. Therefore this market seems to be appropriate to investigate whether firms behave strategically in a dynamic sense and how open-loop or closed-loop as equilibrium concepts alter the size of the estimated parameters. I apply a structural oligopolistic model of dynamic nonprice competition that incorporates learning-by-doing and spillovers. Theory shows that learning-by-doing and learning spillovers have important consequences for firm behavior. Whether firms in the DRAM industry take the strategic effects of learning-by-doing and learning spillovers actually into account when choosing their output strategies, is answered with empirical evidence. Using quarterly data from 1974-1996 at the firm level, I estimate demand and pricing relations for three different generations of DRAM chips. The empirical results show that the game theoretic specification has an important impact and that firms behave strategically. The assumption of an open-loop specification would underestimate the conduct parameter on average about 50%. ZUSAMMENFASSUNG - (Testen dynamischer oligopolistischer Interaktion: Empirische Evidenz aus der Halbleiterindustrie) In diesem Arbeitspapier wird der Einfluß einer dynamischen Spezifikation auf die Schätzung des Verhaltensparameters in einem oligopolistischen Marktes untersucht. Verschiedene empirische Studien haben gezeigt, daß die Halbleiterindustrie, im speziellen der Dynamic Random Access Memory (DRAM) Markt, von dynamischen Elementen wie Learning-by-doing in Unternehmen und Learning spillovers zwischen Unternehmen geprägt ist. Das wirft die Frage auf, ob sich Unternehmen in einem d
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  • Zulehner, Christine, 2003. "Testing dynamic oligopolistic interaction: evidence from the semiconductor industry," International Journal of Industrial Organization, Elsevier, vol. 21(10), pages 1527-1556, December.
  • Handle: RePEc:eee:indorg:v:21:y:2003:i:10:p:1527-1556
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    Cited by:

    1. Jeremiah Harris & Ralph Siebert, 2015. "Driven by the Discount Factor: Impact of Mergers on Market Performance in the Semiconductor Industry," CESifo Working Paper Series 5199, CESifo.
    2. Andrew Clarke, 2008. "Learning-by-Doing and Productivity Dynamics in Manufacturing Industries," Department of Economics - Working Papers Series 1032, The University of Melbourne.
    3. Siebert Ralph B, 2010. "Learning-by-Doing and Cannibalization Effects at Multi-Vintage Firms: Evidence from the Semiconductor Industry," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-32, May.
    4. Ralph B. Siebert, 2019. "Estimating Differential Dynamic Merger Effects on Market Structure and Entry in Related Markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 55(3), pages 431-458, November.
    5. Harris, Jeremiah & Siebert, Ralph, 2017. "Firm-specific time preferences and postmerger firm performance," International Journal of Industrial Organization, Elsevier, vol. 53(C), pages 32-62.
    6. Lambertini, Luca & Mantovani, Andrea, 2006. "Identifying reaction functions in differential oligopoly games," Mathematical Social Sciences, Elsevier, vol. 52(3), pages 252-271, December.
    7. Ralph Siebert, 2016. "The Impact of Horizontal Mergers on Market Structure: Evidence from the Semiconductor Industry," CESifo Working Paper Series 5911, CESifo.
    8. Siebert, Ralph Bernd, 2017. "A structural model on the impact of prediscovery licensing and research joint ventures on innovation and product market efficiency," International Journal of Industrial Organization, Elsevier, vol. 54(C), pages 89-124.
    9. Helland, Eric & Sovinsky, Michelle, 2019. "Do Research Joint Ventures Serve a Collusive Function?," CEPR Discussion Papers 13533, C.E.P.R. Discussion Papers.
    10. Luca Colombo & Paola Labrecciosa, 2012. "Inter-firm knowledge diffusion, market power, and welfare," Journal of Evolutionary Economics, Springer, vol. 22(5), pages 1009-1027, November.

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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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