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 proor countercyclical if the incumbent...

A well-known result by Vega-Redondo implies that in symmetric Cournot oligopoly, imitation leads to the Walrasian outcome where price equals marginal cost. In this paper we show that this result is not robust to the slightest asymmetry in …xed costs. Instead of obtaining the Walrasian outcome as unique prediction, every outcome where agents choose identical actions will be played some fraction ...

Price-setting and quantity-setting oligopoly games lead to extremely different outcomes in the market. One natural way to address this problem is to formulate a model in which some firms use price while the remaining firms use quantity as their decision variable. We introduce a mixed oligopoly game of this type and determine its equilibria. In addition, we consider an extension of this mixed ol...

We develop a model of interlocking bilateral relationships between upstream firms (manufacturers) that produce differentiated goods and downstream firms (retailers) that compete imperfectly for consumers. Contract offers and acceptance decisions are private information to the contracting parties. We show that both exclusive dealing and vertical integration between a manufacturer and a retailer ...

A buyer wishes to purchase a good from a seller who chooses a sequence of prices over time. Each period the buyer can also exercise an outside option, abandoning their search or moving on to another seller. We show there is a unique equilibrium in which the seller charges a constant price in every period equal to the monopoly price, contravening the Coase conjecture. We then embed the singlesel...

This paper compares four equilibrium business cycle models with increasing returns to scale production technologies that allow for aggregate fluctuations due to self-fulfilling expectations. Necessary and sufficient conditions for the existence of stationary sunspot equilibria are derived. Numerical examples demonstrate that the degree of increasing returns necessary for the existence of statio...

Television advertising levels in Europe are regulated according to the “Audiovisual Service Media Directive”, where member states of the European Union usually impose stricter regulation on their Public Service Broadcasting (PSB) channels. The present model evaluates the effects of symmetric and asymmetric regulation of ad levels on competition for viewers and advertisers in a duopoly framework...

We examine the interrelation between interconnection and competition in the Internet backbone market. Networks that are asymmetric in size choose among different interconnection regimes and compete for end-users. We show that a direct interconnection regime, peering, softens competition as compared to indirect interconnection since asymmetries become less influential when networks peer. If inte...

In media markets, the value of advertisement exposure depends on circulation, and media consumers’ valuation is affected by advertising. This paper analyzes media market competition in a duopoly framework. There exist symmetric and asymmetric equilibria in terms of firm size, and sometimes a natural monopoly may emerge . There is less scope for asymmetry when products are more differentiated or...

Using a Hotelling-type product differentiation model (linear city model), we investigate the location strategies of upstream and downstream firms. We show that when transport costs of upstream firms are large, higher transport costs decrease the level of product differentiation of downstream firms. We also show that more inefficient transport technologies of upstream firms may enhance welfare. ...