Strategic interaction in oligopolistic markets
Abstract/Contents
- Abstract
- This dissertation analyzes the strategic interaction of oligopolistic firms in environments with asymmetric information or switching costs. In the first part, I consider a model of single-unit procurement auction that allows for asymmetric bidders, statistically dependent private information, and interdependent costs. I show that its payoff relevant characteristics are nonparametrically identified from the distribution of bids conditional on observable cost shifters under some assumptions that are standard in the empirical auction literature. The result holds for a variety of sealed-bid auctions including first-price, second-price and all-pay. In the second part, I use the identification result to investigate the effect of competition on bidder behavior and procurement cost using highway auction data from Michigan. A bidder's distance to a project location is important in explaining participation and bid levels. However, there is no evidence of more aggressive bidding when competitors are located close to the project. This pattern is at odds with theoretical predictions based on first-price auctions with private costs but can be rationalized by a more general interdependent cost model. I use distance to the project as a cost shifter, and develop an estimation procedure that exploits variation in project locations. The findings point to significant common costs and to a high degree of correlation in private information. Model estimates are used to show that common costs and information correlation reduce the effect of competition on procurement costs by 28 percent relative to a benchmark that assumes independent private costs. Moreover, subsidies to weak bidders are estimated to cost 27 percent more than in the private costs benchmark. % In the third part (co-authored with Liran Einav), we develop a model for studying dynamic competition in environments in which frictions lead to partial lock-in of customers with a specific product. Due to the dynamic aspect associated with customer retention and acquisition, pricing incentives may be quite different compared to more traditional, static product markets. The stylized model we propose maintains certain symmetry properties that allow us to obtain existence and uniqueness of equilibrium. We then study the comparative statics of the model and derive a closed-form relationship between average equilibrium markups and the Herfindahl index. We illustrate how the model can be used by analyzing the effect of mergers in such a dynamic environment.
Description
| Type of resource | text |
|---|---|
| Form | electronic; electronic resource; remote |
| Extent | 1 online resource. |
| Publication date | 2012 |
| Issuance | monographic |
| Language | English |
Creators/Contributors
| Associated with | Somaini, Paulo |
|---|---|
| Associated with | Stanford University, Department of Economics |
| Primary advisor | Wolak, Frank A |
| Thesis advisor | Wolak, Frank A |
| Thesis advisor | Einav, Liran |
| Thesis advisor | Hong, Han |
| Advisor | Einav, Liran |
| Advisor | Hong, Han |
Subjects
| Genre | Theses |
|---|
Bibliographic information
| Statement of responsibility | Paulo Jose Somaini. |
|---|---|
| Note | Submitted to the Department of Economics. |
| Thesis | Thesis (Ph.D.)--Stanford University, 2012. |
| Location | electronic resource |
Access conditions
- Copyright
- © 2012 by Paulo Jose Somaini
- License
- This work is licensed under a Creative Commons Attribution Non Commercial 3.0 Unported license (CC BY-NC).
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