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Author: Daniel R. Shiman Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
To explain why many manufacturing industries have remained highly concentrated, John Sutton has developed a new theory of endogenous sunk costs which predicts that industries with significant endogenous sunk costs will have a lower bound on concentration even as industry demand increases. Endogenous sunk costs are fixed costs that firms can choose to invest in, which affect the price-cost margin of a firm. Any optional fixed investments in quality, advertising, and cost-reducing plant, that allow the firm to raise its price or lower its variable costs, qualify as endogenous sunk costs. This paper cuts through the mathematical complexity of the model and examines the intuition behind the theory, to provide a better understanding of how and when the theory of endogenous sunk costs can be applied, and its limitations. How the incentive for firms to invest in endogenous sunk costs increases as the market expands, and how this can limit the number of firms that can profitably remain in the market, is discussed. The paper examines the key conditions required for this effect, and shows how the same basic results can be obtained even if some of Sutton's assumptions are relaxed. It also examines the reasons for the model's unusual result that in some circumstances, a market expansion can actually induce a reduction in the number of firms, contrary to the usual expectation in industrial organization theory. A proof is provided of the proposition that concentration is bounded below for the Cournot model. The paper then discusses how endogenous sunk costs are likely to have a significant impact on industrial development in ways that Sutton did not discuss, for example when firms have a choice of variable cost-reducing investments.
Author: Daniel R. Shiman Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
To explain why many manufacturing industries have remained highly concentrated, John Sutton has developed a new theory of endogenous sunk costs which predicts that industries with significant endogenous sunk costs will have a lower bound on concentration even as industry demand increases. Endogenous sunk costs are fixed costs that firms can choose to invest in, which affect the price-cost margin of a firm. Any optional fixed investments in quality, advertising, and cost-reducing plant, that allow the firm to raise its price or lower its variable costs, qualify as endogenous sunk costs. This paper cuts through the mathematical complexity of the model and examines the intuition behind the theory, to provide a better understanding of how and when the theory of endogenous sunk costs can be applied, and its limitations. How the incentive for firms to invest in endogenous sunk costs increases as the market expands, and how this can limit the number of firms that can profitably remain in the market, is discussed. The paper examines the key conditions required for this effect, and shows how the same basic results can be obtained even if some of Sutton's assumptions are relaxed. It also examines the reasons for the model's unusual result that in some circumstances, a market expansion can actually induce a reduction in the number of firms, contrary to the usual expectation in industrial organization theory. A proof is provided of the proposition that concentration is bounded below for the Cournot model. The paper then discusses how endogenous sunk costs are likely to have a significant impact on industrial development in ways that Sutton did not discuss, for example when firms have a choice of variable cost-reducing investments.
Author: Victor J. Tremblay Publisher: Springer Science & Business Media ISBN: 1461432413 Category : Business & Economics Languages : en Pages : 820
Book Description
This book covers the main topics that students need to learn in a course on Industrial Organization. It reviews the classic models and important empirical evidence related to the field. However, it will differ from prior textbooks in two ways. First, this book incorporates contributions from behavioral economics and neuroeconomics, providing the reader with a richer understanding of consumer preferences and the motivation for many of the business practices we see today. The book discusses how firms exploit consumers who are prone to making mistakes and who suffer from cognitive dissonance, attention lapses, and bounded rationality, for example and will help explain why firms invest in persuasive advertising, offer 30-day free trials, offer money-back guarantees, and engage in other observed phenomena that cannot be explained by the traditional approaches to industrial organization. A second difference is that this book achieves a balance between textbooks that emphasize formal modeling and those that emphasize the history of the field, empirical evidence, case studies, and policy analysis. This text puts more emphasis on the micro-foundations (i.e., consumer and producer theory), classic game theoretic models, and recent contributions from behavioral economics that are pertinent to industrial organization. Each topic will begin with a discussion of relevant theory and models and will also include a discussion of concrete examples, empirical evidence, and evidence from case studies. This will provide students with a deeper understanding of firm and consumer behavior, of the factors that influence market structure and economic performance, and of policy issues involving imperfectly competitive markets. The book is intended to be a textbook for graduate students, MBAs and upper-level undergraduates and will use examples, graphical analysis, algebra, and simple calculus to explain important ideas and theories in industrial organization.
Author: David VanHoose Publisher: Springer Science & Business Media ISBN: 3642028217 Category : Business & Economics Languages : en Pages : 258
Book Description
This book aims to provide a thoroughly updated overview and evaluation of the industrial organization of banking. It examines the interplay among bank behaviour, market structure, and regulation from the perspective of a variety of public policy issues, including bank competition and risk, market discipline, antitrust issues, and capital regulation. New to this edition are discussions of the economic foundations of international banking, macroprudential regulation, and international coordination of banking policies. The book can serve as a learning tool and reference for graduate students, academics, bankers, and policymakers with interests in the industrial organization of the banking sector and the impacts of banking regulations.
Author: Gabriella Muscolo Publisher: Kluwer Law International B.V. ISBN: 9041186905 Category : Law Languages : en Pages : 633
Book Description
Although competition law and intellectual property are often interwoven, until this book there has been little guidance on how they work together in practice. As the intersection between the two fields continues to grow worldwide, both in case law and in regulation, the book's markets-based approach, focusing on sectors such as pharmaceuticals, IT, telecoms, energy and agriculture in eleven of the world's most active jurisdictions, provides a much-needed in-depth understanding of how this interplay reveals itself among the different legal systems. Written by a range of authors including judges, regulators, academics, economists and practitioners in both fields, the book provides an international comparative perspective as well as detailed analysis of specific cases, policies and proposals for change. Among the issues and topics covered are the following: – free movement of goods and the protection of intellectual property rights; – standard essential patents & injunction in patent cases; – intellectual property rights between technological development and consumer protection; – geo-blocking; – online platforms and antitrust; – excessive prices. In this context, special attention is paid throughout to the increasing dialogue among Competition Authorities and between Judges and Competition Authorities around the world. As matchless remedy for the lack of uniformity heretofore, the book's investigation of the nexus between competition law and intellectual property in different sectors and in various countries takes a giant step towards a more-balanced approach and more-levelled regulation and practices. It will be warmly appreciated by policy makers, decision makers, regulators, practitioners and academics in both competition law and intellectual property fields
Author: Luis C. Corchón Publisher: Edward Elgar Publishing ISBN: 1788112784 Category : Business & Economics Languages : en Pages : 547
Book Description
This second volume of the Handbook includes original contribution by experts in the field. It provides up-to-date surveys of the most relevant applications of game theory to industrial organization. The book covers both classical as well as new IO topics such as mergers in markets with homogeneous and differentiated goods, leniency and coordinated effects in cartels and mergers, static and dynamic contests, consumer search and product safety, strategic delegation, platforms and network effects, auctions, environmental and resource economics, intellectual property, healthcare, corruption, experimental industrial organization and empirical models of R&D.
Author: Giovanni Alberto Tabacco Publisher: Springer ISBN: 3319467298 Category : Business & Economics Languages : en Pages : 88
Book Description
This book presents an original empirical investigation of the market structure of airline city pair markets, shedding new light on the workings of competitive processes between firms. Examining a cross-section of US airline city pairs, Tabacco proposes for the first time that the industry can be understood as a natural oligopoly, each airline market being dominated by one to three airline carriers regardless of market size. The author questions the extent to which airlines deliberately prevent head-to-head competition within city pair markets, and draws intriguing conclusions about competitive forces from the observed market structure. Uncovering some of the main corporate strategies of the airline industry, the book is of immediate relevance to industry managers and practitioners, as well as academic economists.
Author: Luis C. Corchón Publisher: Edward Elgar Publishing ISBN: 178536328X Category : Business & Economics Languages : en Pages : 567
Book Description
The first volume of this wide-ranging Handbook contains original contributions by world-class specialists. It provides up-to-date surveys of the main game-theoretic tools commonly used to model industrial organization topics. The Handbook covers numerous subjects in detail including, among others, the tools of lattice programming, supermodular and aggregative games, monopolistic competition, horizontal and vertically differentiated good models, dynamic and Stackelberg games, entry games, evolutionary games with adaptive players, asymmetric information, moral hazard, learning and information sharing models.
Author: John Sutton Publisher: MIT Press ISBN: 9780262692649 Category : Business & Economics Languages : en Pages : 700
Book Description
John Sutton sets out a unified theory that encompasses two major approaches to studying market, while generating a series of novel predictions as to how markets evolve. Traditionally, the field of industrial organization has relied on two unrelated theories—the cross-section theory and the growth-of-firms theory—to explain cross-industry differences in concentration and within-industry skewness. The two approaches are based on very different mathematical structures and few researchers have attempted to relate them to each other. In this book, John Sutton unifies the two approaches through a theory that rests on three simple principles. The first two, a "survivor principle" that says that firms will not pursue loss-making strategies, and an "arbitrage principle" that says that if a profitable opportunity is available, some firm will take it, suffice to define a set of possible outcomes. The third, the "symmetry principle," says that the strategy used by a new entrant into any submarket depends neither on the entrants identity nor on its history in other submarkets. This allows researchers to bring together the roles of strategic interactions and of independence effects. The result is that the considerations motivating the cross-section tradition and those motivating the growth-of-firms tradition both drop out within a single game-theoretic model. This book follows Sutton's Sunk Costs and Market Structure, published by MIT Press in 1991.
Author: John Sutton Publisher: MIT Press ISBN: 9780262193054 Category : Business & Economics Languages : en Pages : 600
Book Description
Sunk Costs and Market Structure bridges the gap between the new generation of game theoretic models that has dominated the industrial organization literature over the past ten years and the traditional empirical agenda of the subject as embodied in the structure-conduct-performance paradigm developed by Joe S. Bain and his successors.
Author: Daniel R. Shiman
Author: Daniel R. Shiman
Author: Victor J. Tremblay
Author: David VanHoose
Author: Gabriella Muscolo
Author: Luis C. Corchón
Author: Giovanni Alberto Tabacco
Author: Luis C. Corchón
Author: John Sutton
Author: John Sutton
Author: Avner Shaked