Self-Reinforcing Market Dominance

Détails

ID Serval
serval:BIB_5D1007F27382
Type
Article: article d'un périodique ou d'un magazine.
Collection
Publications
Titre
Self-Reinforcing Market Dominance
Périodique
Games and Economic Behavior
Auteur⸱e⸱s
Halbheer D., Fehr E., Goette L., Schmutzler A.
ISSN
0899-8256
Statut éditorial
Publié
Date de publication
11/2008
Peer-reviewed
Oui
Volume
67
Numéro
2
Pages
481-502
Langue
anglais
Résumé
Are initial competitive advantages self-reinforcing, so that markets exhibit an endogenous tendency to be dominated by only a few firms? Although this question is of great economic importance, no systematic empirical study has yet addressed it. Therefore, we examine experimentally whether firms with an initial cost advantage are more likely to invest in marginal cost reductions than firms with higher initial costs. We find that the initial competitive advantages are indeed self-reinforcing, but subjects in the role of firms overinvest relative to the Nash equilibrium. However, the pattern of overinvestment even strengthens the tendency towards self-reinforcing cost advantages relative to the theoretical prediction. Further, as predicted by the Nash equilibrium, mean-preserving spreads of the initial cost distribution have no effects on aggregate investments. Finally, investment spillovers reduce investment, and investment is higher than the joint-profit maximizing benchmark for the case without spillovers and lower for the case with spillovers.
Mots-clé
Cost-reducing investment, Asymmetric oligopoly, Increasing dominance, Experimental study
Web of science
Création de la notice
10/08/2009 13:12
Dernière modification de la notice
20/08/2019 15:15
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