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Inferring the strategy space from market outcomes

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  • Menezes, Flavio
  • Quiggin, John

Abstract

In this paper we show that, if demand varies stochastically, and firms compete after the realization of demand shocks, the strategy space may be inferred from market evidence. The key idea is that, in equilibrium, each firm acts as a monopolist, choosing the optimal price-quantity combination from a residual demand curve determined by a given observation of market demand and the (equilibrium) strategies of the other firms.

Suggested Citation

  • Menezes, Flavio & Quiggin, John, 2013. "Inferring the strategy space from market outcomes," Risk and Sustainable Management Group Working Papers 151206, University of Queensland, School of Economics.
  • Handle: RePEc:ags:uqsers:151206
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    File URL: http://purl.umn.edu/151206
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    References listed on IDEAS

    as
    1. Menezes, Flavio M. & Quiggin, John, 2010. "Markets for influence," International Journal of Industrial Organization, Elsevier, vol. 28(3), pages 307-310, May.
    2. Kao, Tina & Menezes, Flavio & Quiggin, John, 2012. "Meeting the Competition: Commitment and Competitive Behavior," Risk and Sustainable Management Group Working Papers 151205, University of Queensland, School of Economics.
    3. Menezes, Flavio M. & Quiggin, John, 2012. "More competitors or more competition? Market concentration and the intensity of competition," Economics Letters, Elsevier, vol. 117(3), pages 712-714.
    4. Bresnahan, Timothy F, 1981. "Duopoly Models with Consistent Conjectures," American Economic Review, American Economic Association, vol. 71(5), pages 934-945, December.
    5. Flavio Menezes & John Quiggin, 2007. "Games without Rules," Theory and Decision, Springer, vol. 63(4), pages 315-347, December.
    6. Robson, Arthur J., 1981. "Implicit oligopolistic collusion is destroyed by uncertainty," Economics Letters, Elsevier, vol. 7(1), pages 75-80.
    7. Grant, Simon & Quiggin, John, 1996. "Capital Precommitment and Competition in Supply Schedules," Journal of Industrial Economics, Wiley Blackwell, vol. 44(4), pages 427-441, December.
    8. Turnbull, Stephen J., 1983. "Choosing duopoly solutions by consistent conjectures and by uncertainty," Economics Letters, Elsevier, vol. 13(2-3), pages 253-258.
    9. Grant, Simon & Quiggin, John, 1997. "Strategic Trade Policy under Uncertainty: Sufficient Conditions for the Optimality of Ad Valorem, Specific and Quadratic Trade Taxes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 187-203, February.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    competition; supply schedules; equilibrium locus; Industrial Organization; L11;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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