In a model of oligopolistic competition in the banking sector, we analyse how the monetary policy rule chosen by the Central Bank can in ̄uence the incentive of banks to set high interest rates on loans over the business cycle. We exploit the basic model to investigate the potential impact of EMU implementation on collusion among banks. In particular, we consider the possible e€ects of the Europ...

Alternative market structures are distinguishable by the degree of parallel action exhibited by producers. We show that the correlation between output levels varies systematically with the degree of interdependence among firms, and establish an ordering among alternative behavioral hypotheses (Cournot, Stackelberg, Edgeworth/Bertrand, collusion, and perfect competition). Because the ordering is...

Does ethical differentiation of products affect market behavior? We examined this issue in triopolistic experimental markets where producers set prices. One producer’s costs were higher than the others. In two treatments, the additional costs were attributed to compliance with ethical guidelines. In the third, no justification was provided. Many consumers reduced their experimental gains by pur...

This paper reports a laboratory experiment to study pricing and advertising behavior with costly buyer search. Sellers simultaneously post prices and may incur a cost to advertise this price. In the unique symmetric equilibrium, sellers either charge a high unadvertised price or randomize in an interval of lower advertised prices. Increases in search or advertising costs raise equilibrium price...

In standardWalrasian macro-finance models, pecuniary externalities such as fire sales lead to overinvestment in illiquid assets or underprovision of liquidity. We investigate whether imperfect competition (Cournot) improves welfare through internalizing the externality and find that this is far from guaranteed. In a standard model of liquidity shocks, when liquidity is sufficiently scarce, Cour...

In this note we take a first step towards the analysis of collusion in markets with spatial competition, focusing on the case of pure location choices. We find that collusion can only be profitable if a coalition contains more than half of all players. This result holds for location games played in k-dimensional Euclidean space as long as consumers are distributed via atomless density functions...

Considering markets with nonpivotal buyers, we analyze the anticompetitive effects of breakup fees used by an incumbent facing a more efficient entrant in the future. Buyers differ in their intrinsic switching costs. Breakup fees are profitably used to foreclose entry, regardless of the entrant’s efficiency advantage or level of switching costs. Banning breakup fees is beneficial to consumers. ...

The present paper studies repeated oligopoly where the firms compete with price in multiple markets. The markets are subject to independent, stochastic fluctuations in demands. The literature points out that while the demand fluctuations generally hinder collusion, the multimarket contact sometimes facilitates it. We show that on an intermediate range of discount factors where only partial coll...

We study the role of communication within a cartel. Our analysis is carried out in Stigler’s (1964) model of oligopoly with secret price cuts. This is a repeated game with private monitoring since in the model, firms observe neither the prices nor the sales of their rivals. For a fixed discount factor, we identify conditions under which there are equilibria with "cheap talk" communication that ...

This paper analyzes the effects of a potential spillover on technology transfer of a multinational enterprise and on the host country policy. In particular, we examine how both parties’ incentives can be controlled through the ownership structure in an international joint venture. In contrast to existing arguments we show that spillovers must not always have negative effects on technology trans...