How Efficient Is Dynamic Competition? The Case of Price as Investment

• 成果类型: Article
• 署名作者: Besanko, David; Doraszelski, Ulrich; Kryukov, Yaroslav
• 署名单位: Northwestern University; University of Pennsylvania; Pennsylvania Commonwealth System of Higher Education (PCSHE); University of Pittsburgh
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20180131
• 发表日期: 2019
• 页码: 3339-3364
• 关键词: MARKET DOMINANCE; network; monopoly; COSTS

摘要

We study industries where the price that a firm sets serves as an investment into lower cost or higher demand. We assess the welfare implications of the ensuing competition for the market using analytical and numerical approaches to compare the equilibria of a learning-by-doing model to the first-best planner solution. We show that dynamic competition leads to low deadweight loss. This cannot be attributed to similarity between the equilibria and the planner solution. Instead, we show how learning-by-doing causes the various contributions to deadweight loss to either be small or partly offset each other.