The Oligopoly Lucas Tree

• 成果类型: Article
• 署名作者: Dou, Winston Wei; Ji, Yan; Wu, Wei
• 署名单位: University of Pennsylvania; Hong Kong University of Science & Technology; Texas A&M University System; Texas A&M University College Station
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhab120
• 发表日期: 2022
• 页码: 3867
• 关键词: product market competition; RUN RISKS MODEL; cross-section; long-run; dynamic oligopoly; Consumption risk; asset prices; Industry concentration; corporate-investment; FIRM CHARACTERISTICS

摘要

This paper proposes a novel quantitative framework with endogenous strategic competition in heterogeneous concentrated industries. Oligopolies compete strategically for profit margins in repeated games, trading off the benefits of future cooperation against those of reaping higher short-run profits by undercutting their rivals. Cross-industry dispersions in market leadership persistence and cash flow loadings on expected growth, as primitive characteristics, simultaneously determine the relationships among profitability, book-to-market ratios, and systematic risk exposures, thereby quantitatively rationalizing the gross profitability and value premium across industries and, importantly, their interactions. Controlling for the book-to-market ratio (gross profitability) makes the gross profitability (value) premium more pronounced.