Advance Production, Inventories and Market Power: An Experimental Investigation

Douglas Davis

No 1001, Working Papers from VCU School of Business, Department of Economics

Abstract: This paper reports an experiment conducted to assess the effects of alterations in production conditions and product durability on market power in Bertrand-Edgeworth duopolies. Experiment results indicate that advance production increases market power in the sense that mean transaction prices increase relative to static Nash equilibrium predictions for a baseline market. In a similar way, a simple inventory option reduces market power. We also find that both advance production and inventory carryover undermine a strong tendency toward tacit collusion observed in our baseline duopoly markets.

Keywords: Experiments; Bertrand-Edgeworth Competition; Advance Production; Inventory Carryover (search for similar items in EconPapers)
JEL-codes: C9 D4 L4 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2010-02, Revised 2011-01
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.people.vcu.edu/~dddavis/papers/New%20Ad ... _INV_DAVIS020311.pdf Forthcoming in Economic Inquiry (application/pdf)
http://www.people.vcu.edu/~dddavis/papers/New%20Ad ... P_INV_APPENDICES.pdf Appendices (application/pdf)
http://www.people.vcu.edu/~dddavis/papers/New%20Ad ... 311_INSTRUCTIONS.pdf Instructions (application/pdf)

Related works:
Journal Article: ADVANCE PRODUCTION, INVENTORIES, AND MARKET POWER: AN EXPERIMENTAL INVESTIGATION (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:vcu:wpaper:1001

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