The robustness of industrial commodity oligopoly pricing strategies

David M Newbery and Thomas Greve ()

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: Industrial commodity markets are typically oligopolies in which firms set prices but need to make sunk and durable investment decisions, requiring them to make predictions of future prices. Mark-up pricing models are attractive both for setting prices and predicting future prices for investment analysis. Simple algorithms can find Nash equilibria, but these equilibria are not necessarily robust. This paper examines fixed and proportional mark-up models and demonstrates that they are robust to single firm Nash Cournot deviations but not against more sophisticated deviations in the deterministic case. Cournot equilibria are not robust under demand uncertainty, where proportional mark-up models emerge as the most robust when marginal costs are increasing.

Keywords: market modelling; mark-up equilibria; robustness; oligopoly (search for similar items in EconPapers)
JEL-codes: C63 C73 D43 L10 L13 L94 (search for similar items in EconPapers)
Date: 2015-12-18
New Economics Papers: this item is included in nep-bec and nep-com
Note: dmgn, tg336
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.econ.cam.ac.uk/sites/default/files/pub ... pe-pdfs/cwpe1540.pdf

Related works:
Working Paper: The robustness of industrial commodity oligopoly pricing strategies (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:1540

Access Statistics for this paper

More papers in Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge
Bibliographic data for series maintained by Jake Dyer ().