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Industry Structure and Pricing Over the Business Cycle

In: THE ANALYSIS OF COMPETITION POLICY AND SECTORAL REGULATION

Author

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  • Yossi Spiegel
  • Konrad Stahl

Abstract

We consider the interaction between an incumbent firm and a potential entrant, and examine how this interaction is affected by demand fluctuations. Our model gives rise to procyclical entry, prices, and price-cost margins, although the average price in the market can be countercyclical if the entrant is a first mover, and capacity utilization can be either pro- or countercyclical if the incumbent is a first mover. Moreover, our results show that entry deterrence by the incumbent firm can either amplify or dampen the effect of demand fluctuations on prices, price-cost margins, and capacity utilization.

Suggested Citation

  • Yossi Spiegel & Konrad Stahl, 2014. "Industry Structure and Pricing Over the Business Cycle," World Scientific Book Chapters, in: Martin Peitz & Yossi Spiegel (ed.), THE ANALYSIS OF COMPETITION POLICY AND SECTORAL REGULATION, chapter 5, pages 115-140, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814616362_0005
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    Citations

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    Cited by:

    1. Jael, Paul, 2014. "Full cost, profit et concurrence [Full cost, Profit and Competition]," MPRA Paper 64406, University Library of Munich, Germany.
    2. Lambertini, Luca & Marattin, Luigi, 2021. "On prices’ cyclical behaviour in oligopolistic markets," Research in Economics, Elsevier, vol. 75(1), pages 79-86.
    3. Jael, Paul, 2020. "A Rational Theory of Producer’s Equilibrium in Fifteen Principles," MPRA Paper 99456, University Library of Munich, Germany.
    4. Bernhard Dachs & Martin Hud & Christian Köhler & Bettina Peters, 2016. "Employment Effects of Innovations over the Business Cycle: Firm-Level Evidence from European Countries," DEM Discussion Paper Series 16-20, Department of Economics at the University of Luxembourg.
    5. Jael, Paul, 2014. "Full Cost, Profit and Competition," MPRA Paper 59630, University Library of Munich, Germany.

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