Oligopoly Supergames: Some Empirical Evidence on Prices and Margins

Ian Domowitz, Robert Hubbard and Bruce Petersen

Journal of Industrial Economics, 1987, vol. 35, issue 4, 379-98

Abstract: This paper is a panel data study on the behavior of prices and margins of oligopolies involved in repeated games. The authors examine two supergame models which generate very different predictions about the cyclical behavior of prices and margins. Evidence on the levels of price-cost margins indicates that oligopolies achieve equilibria that more closely resemble a one-shot Cournot-Nash outcome than monopoly. The authors find, however, that industries with "high" price-cost margins exhibit cyclical price behavior which is quite different from that of unconcentrated industries. Little evidence of price wars during either recessions or booms is found. Copyright 1987 by Blackwell Publishing Ltd.

Date: 1987
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