An empirical test of the effect of excess capacity in price setting, capacity-constrained supergames

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20 Citations (Scopus)

Abstract

In a multi-period game, industry excess capacity may act to deter firms from cheating on a non-cooperative oligopoly price. A model is developed that translates the deterrrent influence of excess capacity into predictions about the relationship between excess capacity and oligopoly price-cost margins. The model is tested with time-series data from the U.S. aluminum industry. Results are consistent with those predicted by the model.

Original languageEnglish (US)
Pages (from-to)231-241
Number of pages11
JournalInternational Journal of Industrial Organization
Volume7
Issue number2
DOIs
StatePublished - Jun 1989

Fingerprint

Time series
Industry
Aluminum
Price setting
Empirical test
Excess capacity
Supergame
Costs
Oligopoly
Cheating
Price-cost margin
Prediction
Time series data

ASJC Scopus subject areas

  • Industrial relations
  • Aerospace Engineering
  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)
  • Strategy and Management
  • Industrial and Manufacturing Engineering

Cite this

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abstract = "In a multi-period game, industry excess capacity may act to deter firms from cheating on a non-cooperative oligopoly price. A model is developed that translates the deterrrent influence of excess capacity into predictions about the relationship between excess capacity and oligopoly price-cost margins. The model is tested with time-series data from the U.S. aluminum industry. Results are consistent with those predicted by the model.",
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