Strategic Behavior and Price Taking in Large Markets PDF Download

Author: Sebastian Köhne
Publisher:
ISBN:
Category :
Languages : en
Pages : 108

View

Book Description

Author: Jean Jaskold Gabszewicz
Publisher: Edward Elgar Publishing
ISBN: 9781782543220
Category : Business & Economics
Languages : en
Pages : 236

View

Book Description
'To non-economists, it is hard to understand why economists spend so much effort on the competitive model whereas the world seems to be replete with large and powerful economic actors. In this respect, Jean Gabszewicz is atypical: he has spent most of his research time working on imperfectly competitive markets. However, instead of restricting himself to partial equilibrium analyses, he has tackled from the outset the problem of imperfect competition in a system of interrelated markets with the aim of studying how market power is spread throughout the whole system. This is one of the most challenging and fascinating tasks that economists face. But this is also a very hard one, and may explain why so few have tried. This book builds on the seminal contributions of Cournot and Edgeworth and does not intend to provide a full-fledged answer to the many questions raised by the general theory of imperfect competition. However, by presenting in a transparent way most of the problems that lie at the roots of imperfect competition in general equilibrium and by proposing various elegant solutions, it paves the way to any future research in the field. No doubt it will become a basic reference in the long run. The economics profession should thank Jean Gabszewicz for a fresh and daring way of looking at market power.' - Jacques Thisse, Université Catholique de Louvain, Belgium and École Nationale des Ponts et Chaussées, France Jean Gabszewicz's new book is devoted to the study of strategic multilateral exchange. Contrary to the classical competitive paradigm in which agents are assumed to behave as price takers, here traders are allowed to consciously behave as strategic agents who aim to influence trade to their own advantage. This is usually done in oligopoly theory using a partial equilibrium approach while in this case a system of interrelated markets is considered.

Author: Charles A. Holt
Publisher: Princeton University Press
ISBN: 0691188971
Category : Business & Economics
Languages : en
Pages :

View

Book Description
From a pioneer in experimental economics, an expanded and updated edition of a textbook that brings economic experiments into the classroom Economics is rapidly becoming a more experimental science, and the best way to convey insights from this research is to engage students in classroom simulations that motivate subsequent discussions and reading. In this expanded and updated second edition of Markets, Games, and Strategic Behavior, Charles Holt, one of the leaders in experimental economics, provides an unparalleled introduction to the study of economic behavior, organized around risky decisions, games of strategy, and economic markets that can be simulated in class. Each chapter is based on a key experiment, presented with accessible examples and just enough theory. Featuring innovative applications from the lab and the field, the book introduces new research on a wide range of topics. Core chapters provide an introduction to the experimental analysis of markets and strategic decisions made in the shadow of risk or conflict. Instructors can then pick and choose among topics focused on bargaining, game theory, social preferences, industrial organization, public choice and voting, asset market bubbles, and auctions. Based on decades of teaching experience, this is the perfect book for any undergraduate course in experimental economics or behavioral game theory. New material on topics such as matching, belief elicitation, repeated games, prospect theory, probabilistic choice, macro experiments, and statistical analysis Participatory experiments that connect behavioral theory and laboratory research Largely self-contained chapters that can each be covered in a single class Guidance for instructors on setting up classroom experiments, with either hand-run procedures or free online software End-of-chapter problems, including some conceptual-design questions, with hints or partial solutions provided

Author: Somdeb Lahiri
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

View

Book Description
The model of strategic market games due to Shubik (1973), Shapley (1976) and Shapley and Shubik (1977) is based on the assumption of strategic behavior on the part of buyers and sellers. Unlike Cournot who assumed that buyers are price takers, in strategic market games all the agents are assumed to behave strategically. A particular case of the more general strategic market games is the case of a bilateral oligopoly. In this paper we are concerned with the version of bilateral oligopoly due to Gabszewicz and Michel (1997). However, we assume that on the fringe of this bilateral oligopoly is a market in which the buyers act as price takers. Thus in our model there are two goods X and Y. X is the numeraire good and also plays the role of money in our model. The other good is Y which is a consumption good. The sellers of Y are initially endowed with Y and no X; the buyers of Y are initially endowed with X and no Y. Ordinarily, with price-taking behavior on the part of buyers, and all agents caring for both X and Y, our model would be no different from the one proposed by Codognato and Gabszewicz (1991) and reproduced in Gabszewicz (2002, 2006). In this paper we assume that while buyers care for both X and Y, sellers care only for X and hence are profit maximizers. The sellers are assumed to behave strategically and there are two types of buyers - those who behave strategically and those who are price takers. In the bilateral oligopoly, each seller offers a portion of his initial endowment of Y to the buyers who submit bids in units of X. If the total bids and offers in this market are positive, then the price of Y is determined solely by the ratio of bids to offers. This also determines the price of Y in the market where buyers are price takers. In fact if the price of Y differed on the two markets there would always be scope for arbitrage - someone could buy Y on the market where it is cheaper and sell it for a profit on the market where it is more expensive. The price-taking or competitive buyers express the quantity of Y that they demand at this price. Since the sellers have no use for Y, they offer to the competitive buyers whatever of Y that remains after they have made offers to the strategic buyers. The allocation that is determined after the bids and offers are submitted is as follows. Each seller recovers the value of his offer in the bilateral oligopoly from the strategic buyers. Each strategic buyer gets the quantity of Y that he can purchase with the bid that he has placed in the market for Y. The amount that the sellers offer on the competitive market is distributed among the buyers by using a proportional rule: each buyer obtains an amount of Y that is proportional to the quantity of Y that he demands. Each competitive buyer pays for the Y that he has purchased its value in units of X at the price determined by the bilateral oligopoly. Each seller sells an amount of Y that is proportional to the quantity of Y that he offered on the market and recovers from the competitive market its value in units of X. There are two possibilities in the competitive market: (a) there is excess demand for Y so that the buyers are rationed; or (b) there is excess supply so that each buyer gets whatever of Y he demanded but the sellers sell only a portion of what they offered in the competitive market. We look for an equilibrium in this model where each seller is satisfied with the quantity he offers on the bilateral oligopoly, given the bids and offers of all other strategic players and each strategic buyer is satisfied with his bid, given the bids and offers of all other strategic players. In other words the equilibrium is self enforcing. It turns out that in this model there is a trivial equilibrium: one in which no bids or offers are submitted. Hence we narrow our scope to a particular case of non-trivial equilibrium, i.e. an active equilibrium one in which all strategic players submit either a positive bid or a positive offer. In this class we further narrow down our interest to only those equilibria where no one is rationed in the competitive market. We call such equilibria, exact active. Our main result says that if the economy is replicated giving rise to a convergent sequence of (type) symmetric exact active equilibria (i.e. exact active equilibria where all replica of an agent in the original economy choose the same strategy) then the corresponding sequence of price-allocation pairs converge to a competitive equilibrium for the original economy. This result is analogous to the asymptotic convergence of Cournot equilibria that is discussed in Lahiri (2010) or Lahmandi-Ayed (2001). In other words as the number of agents become large, there is at least one sequence of equilibrium price-allocation pairs that approximates a competitive equilibrium, provided there exists a convergent sequence of symmetric exact active equilibria. In a final section we discuss an example of an economy where all buyers have Cobb-Douglas utility functions and show that the concepts introduced in this paper (as also the convergence result) are non-vacuous. Similar analysis for oligopoly in the context of pure exchange economy can be found in Lahiri (2011). Ordinarily the justification for competitive price taking behavior is the presence of a large number of agents on the same side of the market. However, here we see that even with a small number of agents there is the distinct possibility of price-taking behavior being sustainable. We do not need an auctioneer to call out the prices on the competitive market. The price is determined by strategic interaction that takes place in a bilateral oligopoly on whose fringe the competitive market is located. Hence this is one case where competitive price formation without an auctioneer or the assumption of a large number of buyers, is possible.

Author: Jean-Manuel Izaret
Publisher: John Wiley & Sons
ISBN: 1394190581
Category : Business & Economics
Languages : en
Pages : 439

View

Book Description
The right pricing strategy can change the entire trajectory of a business, a market, and even society at large. To help you create your best pricing strategy efficiently and confidently, two leaders from BCG are introducing fresh perspectives on pricing that take you far beyond the realm of mind-numbing numbers. In their new book Game Changer: How Strategic Pricing Shapes Businesses, Markets, and Society, Jean-Manuel Izaret and Arnab Sinha simplify and clarify pricing strategy by integrating its many frameworks and concepts into seven distinct pricing games, each with its own proven tools, rules, forces, and structures. To help you pick the right game and play it well, Izaret and Sinha have developed the Strategic Pricing Hexagon, a tool refined through years of testing, iteration, and adaptation. The Hexagon is your portal to a business world where stronger growth and better financial performance come from a set of strategic pricing decisions, not endless myopic quests for optimal prices. But more than that, the Hexagon will change the way you think about and talk about pricing. The current conversation around pricing – as expressed through economics textbooks, Excel spreadsheets, political discourse, and educated guesswork – makes it easy to believe that pricing is nothing more than a technical, tactical and, for most people, boring game of numbers. Game Changer changes that conversation bysharing stories and research that bring the Hexagon and its seven pricing games to life. With research from BCG’s Bruce Henderson Institute and real-world examples from the world's most influential companies, the authors and their colleagues at BCG define pricing strategy as a business leader’s or business owner’s conscious decisions about how money flows in their market. They show how companies succeed in the long term when they focus on collaborative growth and value sharing with customers, not zero-sum value extraction from them. Discover how you can create and implement a winning pricing strategy that changes the trajectory of your business, your market, and even society.

Author: Jean Jaskold Gabszewicz
Publisher: Oxford University Press, USA
ISBN: 0198233418
Category : Business & Economics
Languages : en
Pages : 98

View

Book Description
Perfect competition provides the model of a frictionless economy, in which price-setting economic agents behave independently of each other, abandoning to the market the coordination of their individual decisions. The implications of this model are extensively presented in the traditional price theory textbooks. Imperfect competition is the paradigm that develops as soon as economic agents interact in a conscious manner, which is the rule when competition takes place amongst a restricted number of agents. In this system, agents act strategically, taking into account the impact of their decisions on competitors' behaviour and on the price mechanism. Such situations commonly arise when firms differentiate their products, erect strategic entry barriers, or exploit the imperfect information of their customers about the price or characteristics of their product. This book explores the theoretical richness of these economic contexts, using some basic tools of game theory. Designed as an ancillary text for graduate students, it not only summarizes the historic contributions made by economic theorists such as Cournot and Edgeworth, but also makes accessible many of the most recent developments in the same field.

Author: Markus Thomas Münter
Publisher: UTB
ISBN: 3825259080
Category : Business & Economics
Languages : en
Pages : 421

View

Book Description
Microeconomics is not applied math – frameworks in this book are regularly in use in daily managerial practice and strategic decision-making. Numerous case studies cover price discrimination, economies of scale, digital business models, game theory, dealing with uncertainty, entry barriers or sunk costs – all of which are crucial for understanding market dynamics and competitive behaviour.

Author: Luís Ángel Medrano
Publisher:
ISBN:
Category :
Languages : en
Pages :

View

Book Description
We analyze the effects of strategic behavior by a large informed trader in a price discovery process used in opening auctions in continuous trading systems. It is found that the large informed trader manipulates the market using a contrarian strategy to neutralize the effect of the trades of competitive informed agents. Furthermore, consistent with the empirical evidence available, we find that information revelation accelerates close to the opening, that the market price approaches but does not converge to the fundamental value, and that the expected trading volume displays a U-shaped pattern.

Author: Robert Bork
Publisher:
ISBN: 9781736089712
Category :
Languages : en
Pages : 536

View

Book Description
The most important book on antitrust ever written. It shows how antitrust suits adversely affect the consumer by encouraging a costly form of protection for inefficient and uncompetitive small businesses.

Author: Michael Morris
Publisher: Praeger
ISBN:
Category : Business & Economics
Languages : en
Pages : 232

View

Book Description
An important contribution to marketing literature, this volume offers a comprehensive guide to market-based pricing strategies. The authors present pricing as a relatively simple, but extremely powerful marketing tool--a creative variable which managers can manipulate to accomplish a wide variety of ends. Arguing that companies must move away from the traditional, short-term, reactive methods relied upon to set and manage prices, the authors call for a systematic, strategic and market-based approach to the pricing problem. Their central unifying theme is that pricing begins and ends with the customer and that every pricing action should be part of a larger pricing program build around the realities of customer needs and competitor pressures. Written with a minimum of jargon and amply illustrated with explanatory tables and figures, this is an excellent introduction to pricing for both seasoned and aspiring marketing and product managers. Morris and Morris begin by examining the overall concept of price as a statement of value. Subsequent chapters offer in-depth guidance on the development of market-based pricing, addressing such critical issues as pricing strategy over the product life cycle, linking pricing and marketing strategy, understanding and using elasticity, the psychology of pricing, and negotiating prices with customers. Particular attention is paid to the question of price differentials--charging different prices to different classes of consumers--and the legal and ethical ramifications of adopting strategies based on price differentials. The authors also explore cost-based pricing, industry and competitor analysis, pricing across the product line, and computers as an aid in pricing. Throughout, references to real-world cases and problems helps the manager to relate the concepts of market-based pricing to the pricing decisions and considerations actually confronted on the job.