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Demand Shocks, Learning-by-Doing and Exclusion

Author

Listed:
  • Bobtcheff, Catherine
  • Crampes, Claude
  • Lefouili, Yassine

Abstract

This note examines how an exogenous industry-wide demand shock, such as the one resulting from the use of governmental subsidies, affects the exclusionary potential of learning-by-doing. We develop a two-period duopoly model in which an increase in a firm's first-period output leads to a decrease in its second-period marginal cost, and apply it to two special scenarios: one in which demand and learning technologies are linear and one in which firms are infinitely impatient. In the first scenario, we establish that a positive demand shock amplifies the exclusionary effect of learning-by-doing if and only if firms are sufficiently asymmetric in their learning abilities. In the second scenario, we emphasize the key role of the demand curvature as a determinant of the effect of a demand shock on the exclusionary potential of learning-by-doing.

Suggested Citation

  • Bobtcheff, Catherine & Crampes, Claude & Lefouili, Yassine, 2018. "Demand Shocks, Learning-by-Doing and Exclusion," TSE Working Papers 18-911, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:32606
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    References listed on IDEAS

    as
    1. William Novshek, 1985. "On the Existence of Cournot Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(1), pages 85-98.
    2. Cabral, Luis M B & Riordan, Michael H, 1994. "The Learning Curve, Market Dominance, and Predatory Pricing," Econometrica, Econometric Society, vol. 62(5), pages 1115-1140, September.
    3. Dasgupta, Partha & Stiglitz, Joseph E, 1988. "Learning-by-Doing, Market Structure and Industrial and Trade Policies," Oxford Economic Papers, Oxford University Press, vol. 40(2), pages 246-268, June.
    4. Emmanuel Petrakis & Eric Rasmusen & Santanu Roy, 1997. "The Learning Curve in a Competitive Industry," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 248-268, Summer.
    5. repec:bla:jindec:v:45:y:1997:i:2:p:155-69 is not listed on IDEAS
    6. Luís M. B. Cabral & Michael H. Riordan, 1997. "The Learning Curve, Predation, Antitrust, and Welfare," Journal of Industrial Economics, Wiley Blackwell, vol. 45(2), pages 155-169, June.
    7. Agliardi, Elettra, 1990. "Learning-by-doing and the emergence of monopoly : A note," Economics Letters, Elsevier, vol. 32(4), pages 353-357, April.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Demand shocks; learning-by-doing; market structure; exit;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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