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    A Dynamic Model of Oligopolistic Market Structure, Featuring Positioning Investments

    Access Status
    Fulltext not available
    Authors
    Bloch, Harry
    Eaton, C.
    Rothschild, R.
    Date
    2014
    Type
    Journal Article
    
    Metadata
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    Citation
    Bloch, H. and Eaton, C. and Rothschild, R. 2014. A Dynamic Model of Oligopolistic Market Structure, Featuring Positioning Investments. International Journal of the Economics of Business. 21 (3): pp. 379-411.
    Source Title
    International Journal of the Economics of Business
    DOI
    10.1080/13571516.2014.956431
    ISSN
    13571516
    School
    School of Economics and Finance
    URI
    http://hdl.handle.net/20.500.11937/13138
    Collection
    • Curtin Research Publications
    Abstract

    In their efforts to create and maintain a position in a market, firms make positioning investments of various sorts, in R&D, plant, advertising, and location, or more generally, in product development and maintenance. In an environment where the success of positioning investments is stochastic, the positioning game played by firms that compete to serve a market is necessarily dynamic. We model the positioning and operating decisions of firms in an environment of this sort. When the market is large enough to support at least one active firm, in the steady state equilibrium, the expected number of firms serving the market at a point in time is a nearly continuous function of market size, in sharp contrast to the familiar integer-valued step function seen in classic models, and expected total and consumer surplus are higher than standard non-stochastic models would indicate. This suggests that the classic models are not always a sound guide for policy.

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