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Industry Structure and Pricing over the Business Cycle

Author

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  • Yossi Spiegel
  • Konrad O. Stahl

Abstract

We consider the interaction between an incumbent firm and a potential entrant, and examine how this interaction is affected by demand fluctuations. Our model gives rise to procyclical entry, prices, and price-cost margins, although the average price in the market can be countercyclical if the entrant is a first mover, and capacity utilization can be either pro- or countercyclical if the incumbent is a first mover. Moreover, our results show that entry deterrence by the incumbent firm can either amplify or dampen the effect of demand fluctuations on prices, price-cost margins, and capacity utilization.

Suggested Citation

  • Yossi Spiegel & Konrad O. Stahl, 2014. "Industry Structure and Pricing over the Business Cycle," CESifo Working Paper Series 4848, CESifo.
    • Handle: RePEc:ces:ceswps:_4848
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    References listed on IDEAS

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    Citations

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    Cited by:

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    3. Jael, Paul, 2020. "A Rational Theory of Producer’s Equilibrium in Fifteen Principles," MPRA Paper 99456, University Library of Munich, Germany.
    4. Jael, Paul, 2014. "Full Cost, Profit and Competition," MPRA Paper 59630, University Library of Munich, Germany.
    5. Bernhard Dachs & Martin Hud & Christian Köhler & Bettina Peters, 2016. "Employment Effects of Innovations over the Business Cycle: Firm-Level Evidence from European Countries," DEM Discussion Paper Series 16-20, Department of Economics at the University of Luxembourg.

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    More about this item

    Keywords

    price competition; business cycle; entry; entry deterrence;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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