Search results for "jel:L11"
showing 9 items of 9 documents
The Classical Notion of Competition Revisited
2013
This article seeks to fill a lacuna within classical economics concerning the process of market price determination in situations of market disequilibrium. To this aim, first we distinguish the classical notion of free competition from the Walrasian notion of perfect competition and we argue that the latter is beset with some theoretical difficulties alien to the former. Second, we reconstruct in some detail Smith’s and Marx’s views concerning market price determination and show that Marx’s extensive use of metaphors and numerical examples foreshadows the modern taxonomy of buyers’ market, sellers’ market, and mixed strategy equilibrium in the capacity space of a standard Bertrand duopoly m…
ENDOGENOUS TIMING WITH FREE ENTRY
2006
A free entry model with linear costs is considered where firms first choose their entry time and then compete in the market according to the resulting timing decisions. Multiple equilibria arise allowing for infinitely many industry output configurations encompassing one limit-output dominant firm and the Cournot equilibrium with free entry as extreme cases. Sequential entry is never observed. Both Stackelberg and Cournot-like outcomes are sustainable as equilibria however. When the number of incumbents is given, entry is always prevented, and industry output is sometimes larger than the entry preventing level.
Inflation dynamics in a model with firm entry and (some) heterogeneity
2014
We analyse the incidence of endogenous entry and firm TFP-heterogeneity on the response of aggregate inflation to exogenous shocks. We build up an otherwise standard DSGE model in which the number of firms is endogenously determined and firms differ in their steady state level of productivity. This splits the industry structure into firms of different sizes. Calibrating the different transition rates, across firm sizes and out of the market we reproduce the main features of the distribution of firms in Spain. We then compare the inflation response to technology, interest rate and entry cost shocks, among others. We find that structures in which large (more productive) firms predominate tend…
Allocating cost reducing investments over competing divisions
2007
This paper examines a three-stage model of divisionalization where, first, two parent firms create independent units, second, the parent firms allocate cost reduction levels over these units, and third, the resulting units compete in a Cournot market given their current costs of production. The introduction of the cost reduction phase is shown to reduce the incentives toward divisionalization severely, relative to other existing models. Namely, the scope for divisionalization in equilibrium reduces as the marginal cost of the cost reducing investment decreases, and eventually vanishes. A second-best welfare analysis shows that, for any given market structure, the equilibrium investment deci…
Endogenous R&D Symmetry in Linear Duopoly with One-way Spillovers
2005
A duopoly model of cost reducing R&D-Cournot market competition is extended to encompass endogenous timing of R&D investments. Under the assumption that R&D spillovers are zero under simultaneous choices of R&D and only flow from the R&D leader to the follower under sequential choices, sequential and simultaneous play at the R&D stage are compared in order to assess the role of technological externalities in stimulating or attenuating endogenous firm asymmetry. The only timing structure of the R&D stage sustainable as subgame–perfect Nash equilibrium involves simultaneous play and thus zero spillovers.
Entry and exit in a vertically differentiated industry
2011
This paper presents a duopoly model of firm rivalry in a vertically differentiated industry when market dynamics is explicitly accounted for. It shows how the interplay between demand (degree of product differentiation, demand elasticity) and cost (fixed and quality costs) factors determine firms’ relative strength when quality is irreversible. The main strategic choices are product quality, price and the timing of entry and exit. Further, firms incur sunk quality costs at time of entry and operating fixed costs of maintaining quality. Although the low quality firm may outlast its rival in the declining phase, both firms wish to be the “quality leader”.
Regional financial development and bank competition: effects on firms' growth
2009
Fernandez de Guevara J. and Maudos J. Regional financial development and bank competition: effects on firms' growth, Regional Studies. This paper analyses the effect of regional financial development and bank competition on firms' growth using the Spanish provinces as a testing ground. The results show that firms in industries with a greater dependence on external finance grow faster in more financially developed provinces. The results also show that bank monopoly power has an inverted-‘U’ effect on firms' growth, suggesting that market power has its highest effect at intermediate values. The effect is heterogeneous among firms according to the financial dependence of the industry to which …
Factors explaining the interest margin in the banking sectors of the European Union
2003
Abstract This study analyses the interest margin in the principal European banking sectors (Germany, France, the United Kingdom, Italy and Spain) in the period 1993–2000 using a panel of 15,888 observations, identifying the fundamental elements affecting this margin. Our starting point is the methodology developed in the original study by Ho and Saunders [Journal of Financial and Quantitative Analysis XVI (1981) 581–600] and later extensions, but widened to take banks' operating costs explicitly into account. Also, unlike the usual practice in the literature, a direct measure of the degree of competition (Lerner index) in the different markets is used. The results show that the fall of marg…
Mesure de la performance des agences bancaires par une approche DEA
2005
Using a DEA framework (Data Envelopment Analysis), we develop new performance indicators for integrated retail networks. A methodological discussion leads us to propose a productivity indicator which respects the criteria of controllability and transversal coherence. We then formalise the relationship between a performance indicator of a network's headquarters and the productivity of its various retailers. Finally, we combine these new indicators in crafting a management tool amenable to a system of balanced scorecards.