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

  • Koulovatianos, Christos
  • Mirman, Leonard J.

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
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  1. 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 155-90, April.
  2. Novshek, William., 1984. "On the Existence of Cournot Equilibrium," Working Papers 517, California Institute of Technology, Division of the Humanities and Social Sciences.
  3. 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.
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  6. 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.
  7. 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.
  8. Gaudet, G. & Salant, S.W., 1988. "Uniqueness Of Cournot Equilibrium: New Results From Old Methods," Cahiers de recherche 8818, Université Laval - Département d'économique.
  9. 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.
  10. 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.
  11. 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.
  12. 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.
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