Market Structure and the Demand for Free Trade ABSTRACT We explore the interplay of market structure and government trade policy in the context of a heterogenous goods duopoly model (allowing for goods to be substitutes or complements) wherein governments simultaneously and noncooperatively choose whether or not to provide subsidies for their firms and then firms noncooperatively choose output ...

We study the welfare implications of two-sided (decentralized) markets involving multiple intermediaries between buyers and sellers. For the analysis, we employ a stylized model where the intermediary sets the quantities of ad slots to purchase and sell, and the prices are a consequence of a Cournot model. The mathematics associated with the model is generic enough that it carries forward to ot...

In a market in which a vertically integrated producer (VIP) supplies an essential input to a retail rival, we explore the role of managerial delegation when it shapes downstream firms’ incentives and determine the endogenous choice of delegation under both Cournot and Bertrand competition. The equilibrium choice of acting as a managerial firm, which is a standard result in literature of strateg...

Consider a Bertrand model in which each rm may be inactive with a known probability, so the number of active rms is uncertain. This activity level can be endogenized in any of several ways{ as whether to incur a xed cost of activity, as output choice, or as quality choice. Our model has a mixed-strategy equilibrium, in which industry pro ts are positive and decline with the number of rms, the s...

Recent experiments suggest that games where actions are strategic substitutes rather than strategic complements exhibit some desirable performance characteristics. This paper reports an experiment conducted to test whether these characteristics extend to differentiated product Cournot and Bertrand markets. We find that Cournot markets do not generally outperform Bertrand markets, and that the o...

We consider three models of investments in generation capacity in restructured electricity systems that differ by their underlying economic assumptions. The first model assumes a perfect, competitive equilibrium. It is very similar to the old capacity expansion models even if its economic interpretation is different. The second model (open-loop Cournot game) extends the Cournot model to include...

An observer makes a finite number of observations of an industry producing a homogeneous good. Each observation consists of the market price, the output of individual firms and perhaps information on a firm’s total cost or cost fluctuation. What restrictions on the data set are necessary and sufficient for it to be consistent with the hypothesis that firms in this industry are playing a Cournot...

We model firms’ output decisions in a repeated duopoly framework focussing on three interrelated issues: 1) the role of learning in the adjustment process toward equilibrium, 2) the role of organizational structure in organizational decision making, and 3) the role of changing environmental conditions on learning and output decisions. We model the firm as a type of artificial neural network, wh...