Demand Shocks, Learning-by-Doing and Exclusion
Catherine Bobtcheff (),
Claude Crampes () and
No 18-911, TSE Working Papers from Toulouse School of Economics (TSE)
This note examines how an exogenous industry-wide demand shock, such as the one resulting from the use of governmental subsidies, affects the exclusionary potential of learning-by-doing. We develop a two-period duopoly model in which an increase in a firm's first-period output leads to a decrease in its second-period marginal cost, and apply it to two special scenarios: one in which demand and learning technologies are linear and one in which firms are infinitely impatient. In the first scenario, we establish that a positive demand shock amplifies the exclusionary effect of learning-by-doing if and only if firms are sufficiently asymmetric in their learning abilities. In the second scenario, we emphasize the key role of the demand curvature as a determinant of the effect of a demand shock on the exclusionary potential of learning-by-doing.
Keywords: Demand shocks; learning-by-doing; market structure; exit (search for similar items in EconPapers)
JEL-codes: D11 L13 Q4 (search for similar items in EconPapers)
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