Market Efficiency and Coalition Structures
We consider a three-stage game in which symmetric firms decide whether to invest in a cost-reducing technology, then they have the possibility to merge (forming coalitions), and eventually, in the third stage, a Cournot oligopoly game is played by the resulting firms (coalitions). We show that, contrary to the existing literature, the monopoly market structure may fail to form even when the number of initial firms is just three. We then introduce a weighted sharing rule and show that a situation in which all firms acquire the cost-reducing asset cannot be sustained as a Subgame Perfect Equilibrium.
|Date of creation:||28 Mar 2007|
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- Espinosa Alejos, María Paz & Macho Stadler, Inés, 2002. "Endogenous Formation of Competing Partnership with Moral Hazard," DFAEII Working Papers 2002-34, University of the Basque Country - Department of Foundations of Economic Analysis II.
- Mar? Paz Espinosa & Inés Macho-Stadler, . "Endogenous Formation Of Partnerships With Moral Hazard," UFAE and IAE Working Papers 448.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
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21, Boston University - Department of Economics.
- Bloch, Francis, 1996. "Sequential Formation of Coalitions in Games with Externalities and Fixed Payoff Division," Games and Economic Behavior, Elsevier, vol. 14(1), pages 90-123, May.
- Yi, Sang-Seung, 1997. "Stable Coalition Structures with Externalities," Games and Economic Behavior, Elsevier, vol. 20(2), pages 201-237, August.
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