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The effects of market structure on industry growth: Rivalrous non-excludable capital

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Listed author(s):
  • Koulovatianos, Christos
  • Mirman, Leonard J.

Abstract

We analyze imperfect competition in dynamic environments where firms use rivalrous but nonexcludable industry-specific capital that is provided exogenously. Capital depreciation depends on utilization, so firms influence the evolution of the capital equipment through more or less intensive supply in the final-goods market. Strategic incentives stem from, (i) a dynamic externality, arising due to the non-excludability of the capital stock, leading firms to compete for its use (rivalry), and, (ii) a market externality, leading to the classic Cournot-type supply competition. Comparing alternative market structures, we isolate the effect of these externalities on strategies and industry growth.

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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 133 (2007)
Issue (Month): 1 (March)
Pages: 199-218

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Handle: RePEc:eee:jetheo:v:133:y:2007:i:1:p:199-218
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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Find related papers by JEL classification:
  • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
  • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
  • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
  • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
  • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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  1. William Novshek, 1985. "On the Existence of Cournot Equilibrium," Review of Economic Studies, Oxford University Press, vol. 52(1), pages 85-98.
  2. Benhabib, Jess & Radner, Roy, 1992. "The Joint Exploitation of a Productive Asset: A Game-Theoretic Approach," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 2(2), pages 155-190, April.
  3. Gérard Gaudet & Stephen W. Salant, 1991. "Uniqueness of Cournot Equilibrium: New Results From Old Methods," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 399-404.
  4. Richard Ericson & Ariel Pakes, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Oxford University Press, vol. 62(1), pages 53-82.
  5. Dutta, Prajit K & Sundaram, Rangarajan, 1992. "Markovian Equilibrium in a Class of Stochastic Games: Existence Theorems for Discounted and Undiscounted Models," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 2(2), pages 197-214, April.
  6. Daniel Cohen & Philippe Michel, 1988. "How Should Control Theory Be Used to Calculate a Time-Consistent Government Policy?," Review of Economic Studies, Oxford University Press, vol. 55(2), pages 263-274.
  7. Levhari, David & Michener, Ron & Mirman, Leonard J, 1981. "Dynamic Programming Models of Fishing: Competition," American Economic Review, American Economic Association, vol. 71(4), pages 649-661, September.
  8. Christos Koulovatianos & Leonard J. Mirman, 2003. "The Effects of Market Structure on Industry Growth," University of Cyprus Working Papers in Economics 7-2003, University of Cyprus Department of Economics.
  9. 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.
  10. Koulovatianos, Christos & Mirman, Leonard J., 2007. "The effects of market structure on industry growth: Rivalrous non-excludable capital," Journal of Economic Theory, Elsevier, vol. 133(1), pages 199-218, March.
  11. Sundaram, Rangarajan K., 1989. "Perfect equilibrium in non-randomized strategies in a class of symmetric dynamic games," Journal of Economic Theory, Elsevier, vol. 47(1), pages 153-177, February.
  12. Novshek, William, 1985. "Perfectly competitive markets as the limits of cournot markets," Journal of Economic Theory, Elsevier, vol. 35(1), pages 72-82, February.
  13. Gerhard Sorger, 2005. "A dynamic common property resource problem with amenity value and extraction costs," International Journal of Economic Theory, The International Society for Economic Theory, vol. 1(1), pages 3-19.
  14. 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.
  15. 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 402-417, June.
  16. 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.
  17. Christos Koulovatianos & Leonard J. Mirman, 2003. "R&D Investment, Market Structure, and Industry Growth," University of Cyprus Working Papers in Economics 8-2003, University of Cyprus Department of Economics.
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Cited by:

  1. Per Krusell & Timo Boppart, 2016. "Labor supply in the past, present, and future: a balanced-growth perspective," 2016 Meeting Papers 261, Society for Economic Dynamics.
  2. Antoniadou, Elena & Koulovatianos, Christos & Mirman, Leonard J., 2013. "Strategic exploitation of a common-property resource under uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 65(1), pages 28-39.
  3. Laurent-Lucchetti, Jérémy & Santugini, Marc, 2012. "Ownership risk and the use of common-pool natural resources," Journal of Environmental Economics and Management, Elsevier, vol. 63(2), pages 242-259.
  4. Eric Fesselmeyer & Leonard J. Mirman & Marc Santugini, 2016. "Strategic Interactions in a One-Sector Growth Model," Dynamic Games and Applications, Springer, vol. 6(2), pages 209-224, June.
  5. Lambertini, Luca & Palestini, Arsen, 2014. "On the feedback solutions of differential oligopoly games with hyperbolic demand curve and capacity accumulation," European Journal of Operational Research, Elsevier, vol. 236(1), pages 272-281.
  6. Koulovatianos, Christos & Mirman, Leonard J., 2007. "The effects of market structure on industry growth: Rivalrous non-excludable capital," Journal of Economic Theory, Elsevier, vol. 133(1), pages 199-218, March.

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