Testing dynamic oligopolistic interaction: evidence from the semiconductor industry

The objective of this paper is to test whether firms in the dynamic random access memory (DRAM) industry take the intertemporal strategic effect of their contemporaneous output decision on their rivals’ future output decision into account or whether they precommit themselves to a production plan. Learning-by-doing and spillovers are present in this industry and introduce an intertemporal component to firms’ strategies. A simplified version of Jarmin's [RAND J. Econ. 250 (1994) 441] dynamic oligopolistic model is applied to firm-level data. Demand and pricing relations for five DRAM generations are estimated. The empirical results show that firms behave strategically and price–cost margins are likely overestimated in a precommitment specification.     

Testing oligopolistic behavior

This paper develops an empirical model of short-run pricing behavior for firms in a homogeneous product oligopoly. It is based on the variable profit function and related output supply and factor demand equations and is used to analyze the behavior of firms in the coffee roasting industry. A parametric test of the dominant firm model is developed and applied. The hypothesis of dominant firm behavior and Cournot behavior are rejected. The hypothesis of price-taking behavior is rejected for the largest two firms in the industry but is not rejected for all other firms. Using the estimated pattern of firm behavior, an index of overall industry performance is constructed.     

Merger externalities in oligopolistic markets

We evaluate the external effects of 183 large mergers at the market level by assessing the impact on the main competitors of the merging firms. Using synthetic control groups and difference in difference estimation, we find that the return on assets of rival firms increases significantly after a merger. The size of the effect varies strongly with market characteristics and the intensity of competition.     

An experiment on partial cross-ownership in oligopolistic markets

We examine coordinated and unilateral effects of horizontal partial cross-ownership (PCO) in a laboratory experiment. We consider homogeneous Bertrand markets where firms have symmetric, non-controlling shares of each other, and conduct the experiment with both stranger and partner matching. The partner data (repeated game) confirm the prediction that firms are more (tacitly) collusive with PCO than without. In the stranger data (one-shot game), average prices are increasing with higher degrees of PCO. This is inconsistent with rather extreme Nash predictions for this setup. We show that in a Quantal Response Equilibrium firms’ incentives to compete are reduced with passive PCO. QRE predictions explain the data from the stranger treatment well.     

A flat-kinded demand function for oligopolistic sellers of homogeneous products

Through half a century of controversy over the complexities of oligopolies and their kinked demand functions one simple aspect of the kinkiness has been by-passed. Invariably the kinked demand functions are represented as lines sloping away from the starting price even though some oligopolies are sellers of homogeneous products. Competition among sellers of identical goods demands variations in the standard kinked demand device to adequately explain their market behavior. A flat-kinked function is logically necessary to illustrate the marker for the homogeneous products of oligopolistic sellers.     

Industry and firm effects of privatization in Malawian oligopolistic manufacturing

This study evaluates the impact of privatization on technical efficiency using panel data from privatized enterprises, state-owned enterprises and private enterprises competing in oligopolistic Malawian manufacturing industries in which privatization took place. The results of the technical efficiency model, based on the period 1970–1997, provide evidence that privatization increases the technical efficiency of all firms (industry effects). Further incentives for improvements in technical efficiency are due to more domestic competition, multinationality and structural adjustment.     

Acquisitions,entry, and innovation in oligopolistic network industries

In industries with network effects, incumbents' installed bases create barriers to entry that discourage entrepreneurs from developing new innovations. Yet, entry is not the only commercialization route for entrepreneurs. We show that the option of selling to an incumbent increases the innovation incentives for entrepreneurs when the network effects are strong and incumbents compete to preemptively acquire innovations. Thus, we establish that network effects and installed bases do not necessarily restrict the innovation incentives and that network effects promote acquisitions over entry.     

Sustainable fashion supply chain management under oligopolistic competition and brand differentiation

In this paper, we developed a new model of oligopolistic competition for fashion supply chains in the case of differentiated products with the inclusion of environmental concerns. The model assumes that each fashion firm's product is distinct by brand and the firms compete until an equilibrium is achieved. Each fashion firm seeks to maximize its profits as well as to minimize its emissions throughout its supply chain with the latter criterion being weighted in an individual manner by each firm. The competitive supply chain model is network-based and variational inequality theory is utilized for the formulation of the governing Nash equilibrium as well as for the solution of the case study examples. The numerical examples illustrate both the generality of the modeling framework as well as how the model and computational scheme can be used in practice to explore the effects of changes in the demand functions; in the total cost and total emission functions, as well as in the weights.     

Consumer privacy in oligopolistic markets: Winners,losers, and welfare

Motivated by the unprecedented availability of consumer information on the Internet, we characterize the winners and losers from potential privacy regulation in the context of four commonly-used oligopoly models: a linear city model, a circular city model, a vertical differentiation model, and a multi-unit symmetric demand model. We show that while there are winners and losers as a result of privacy enforcement, the parties who stand to benefit and the parties who stand to lose, as well as whether social welfare is enhanced or diminished, largely depends on the specific economic setting under consideration.     

R&D competition versus R&D cooperation in oligopolistic markets with evolving structure

This paper considers investment behavior of duopolistic firms subject to technological progress. It is assumed that initially both firms offer a homogeneous product, but after a stochastic waiting time they are able to implement a product innovation. Production capacities of both firms are product specific. It is shown that firms anticipate a future product innovation by under-investing (if the new product is a substitute to the established product) and higher profits, and over-investing (in case of complements) and lower profits, compared to the corresponding standard capital accumulation game. This anticipation effect is stronger in the case of R&D cooperation. Furthermore, since due to R&D cooperation firms introduce the new product at the same time, this leads to intensified competition and lower firm profits right after the new product has been introduced. In addition, we show that under R&D competition the firm that innovates first, overshoots in new-product capacity buildup in order to exploit its temporary monopoly position. Taking into account all these effects, the result is that, if the new product is neither a close substitute nor a strong complement of the established product, positive synergy effects in R&D cooperation are necessary to make it more profitable for firms than R&D competition.     

Strategic interaction in alliances

Research summary: This article studies strategic interactions between firms that form alliances to exploit synergistic benefits. Firms cooperate to create value, but they can also compete to capture value. Fundamental questions rarely addressed by strategy scholars relate to how the configuration of control over resources influences firms' strategies, the potential for termination, and the emergence of cooperation and trust. The formal results reveal crucial aspects of the interorganizational rent‐generating process and yield testable implications. With greater synergistic benefits, firms invest more, but they also compete more intensively to capture more value. With symmetric control, more value gets created, which limits the potential for termination, but also exacerbates the competition for value; from a relational perspective, this form of control augments the calculative rationale of cooperation and trust . Managerial summary: When forming an alliance to exploit synergies, firms engage in a complicated strategic interaction that is part cooperation and part competition. What happens when partner firms cooperate and invest to create value while competing and using costly adversarial tactics to capture value? The analysis reveals that with greater synergistic benefits, firms invest more in value creation, but the fear of opportunism pushes them to waste more resources on value capture tactics. The balance between value creation and value capture, and the possibility that the alliance is terminated depend on the configuration of control over resources. The analysis further reveals under what conditions there can be trust between the partners, such that they focus on value creation and avoid wasting resources in the competition for value . Copyright © 2016 John Wiley & Sons, Ltd.     

Training technology through interaction management

A discussion of specialized computer training to enable employees achieve a higher degree of learner proficiency that will lead to the absence of process errors.     

Managerial problems of university-industry interaction

In post-war Poland, universities and higher schools of technology have had to take over not only the role of centres of intellectual activity, but also of animators of technological and economic life. Universities employ more than 60|X% of the total scientific staff of the country, so that the issue of university-industry cooperation is of major importance to them. Despite obstacles caused by the different needs of the two partners, there are many motives for both sides to cooperate, and the various forms the contract can take in practice are described. Design of the coupling is analysed in terms of a two-cycle model of technology transfer, and ways of strengthening the coupling between the two are elaborated. The extent of the university's involvement in research with industrial application is described. Specific measures need to be taken by university boards of management to ensure that this kind of work does not lead to undesirable limitation of scientific freedom in the choice of objects of research, and that the research profile is compatible with the educational programme of the university.     

Dynamics of dyadic competitive interaction

In this study of firms’ entries into and exits from each other’s markets, we link research on multipoint competition to the emerging action‐oriented, dyadic approach to interfirm rivalry by specifying market interdependencies between pairs of firms that condition their potential for rivalry over time. Our dynamic analysis of competitive interactions between pairs of commuter airlines in California reveals the idiosyncratic and asymmetric market microstructures that characterize dyadic competitive relationships and helps explain why firms grapple vigorously with some of their competitors while being passive toward others. We show that there is an inverted U‐shaped relationship between firms’ rates of entry into and exit from each other’s markets and the level of multimarket contact in competitor dyads. We also show how this basic curvilinear effect varies from dyad to dyad as a function of relative levels of multimarket contact with competitors in other dyads and the relative sizes of competitors in a focal dyad. Copyright © 1999 John Wiley & Sons, Ltd.     

Modeling New Product Screening Decisions

A variety of systematic procedures have been proposed to manage the task of evaluating potential new products at various stages of the development process. Kenneth Baker and Gerald Albaum have chosen to contrast the performance of several different types of screening models using the actual evaluations of 86 new product managers employed by 76 Fortune 500 companies. Managers were briefed on six lighting products actually developed by another manufacturer, and they evaluated all six products using 33 criteria. The screening models were used to predict the success or failure of each of the product concepts, and these predictions were compared to the actual results experienced by the original manufacturer. Thus, the study provides insights on the accuracy of screening models.     

Modeling Long Memory in REITs

One stylized feature of financial volatility impacting the modeling process is long memory. This article examines long memory for alternative risk measures, observed absolute and squared returns for Daily Equity real estate investment trust (REITs) and compares the findings for a market equity index. The article utilizes a variety of tests for long memory finding evidence that REIT volatility does display persistence. Trading volume is found to be strongly associated with long memory. Results suggest differences in the findings with regard to REITs in comparison to the broader equity sector.     

Modeling agility of supply chain

Agility is the fundamental characteristic of a supply chain needed for survival in turbulent and volatile markets, which are becoming norms as product life cycles shorten and environmental forces create additional uncertainty resulting in higher risk in the supply chain management. Agility further helps in providing the right product, at the right time to the consumer, which is the main objective of any supply chain. In the present paper, using interpretive structural modeling, interrelationships of the variables, influencing supply chain agility, have been derived. These variables have been categorized according to their driving power and dependence. This methodology provides a means by which order can be imposed on the complexity of such variables. The insight from model would help supply chain managers in strategic planning for improving supply chain agility.     

Modeling the Korean Chonsei Lease Contract

Chonsei is a unique Korean lease contract in which the tenant pays an up–front deposit, typically about 40 to 80% of the value of the property, with no requirement for periodic rent payments. At the contract maturation, the landlord then returns the nominal value of the deposit. Since there is no legal obligation on the part of the landlord to deposit the money in an escrow account, the principal default risk associated with the chonsei contract falls on the tenant. We discuss the development and popularity of this contractual agreement in the context of the public policy initiatives, historical and institutional settings surrounding the Korean housing and housing finance market. We develop a contingent–claims model that recognizes the compound options embedded in the chonsei contract. Theoretical predictions are confirmed by an empirical analysis using monthly data from 1986 to 2000. Our analysis shows that the chonsei contract is an indigenous market response to economic conditions prevalent in Korea.     

Improving logistics outsourcing through increasing buyer-provider interaction

Logistics outsourcing has been at the top of the management agenda during recent decades. Through this approach companies have been able to improve logistics performance. However, several studies point out severe problems with outcome and it is even claimed that in some cases “logistics outsourcing has become a source of corporate failure and disappointment” [Boyson, S., Corsi, T., Dresner, M. and Rabinovich, E. (1999). Managing effective third-party logistics relationships: What does it take? Journal of Business Logistics, 20 (1), 73-100.]. Previous research shows that many companies have taken outsourced functions back in-house. The aim of this paper is to explore the reasons behind the problems in logistics outsourcing. Our analysis is based on an extensive literature survey. This examination indicates that outsourcing decisions require a holistic perspective. We apply the industrial network model [Håkansson, H. and Snehota, I. (1995). Developing relationships in business networks. Routledge, London.] for the analysis of potential consequences of logistics outsourcing. The main conclusion of the paper is that increasing interaction between buyer and provider would be beneficial to the outcome of outsourcing.     

The drama of interaction within business networks

We propose a dramaturgical approach to the understanding of business networks with particular reference to IMP research. Our purpose is to focus upon immeasurable processes and practices too often neglected by the tangible, variance modeling of business networks (Colville & Pye, 2010; Rinallo & Golfetto, 2006). This paper follows our call to take language and communication more seriously (Ellis, Lowe & Purchase, 2006). The inventive fluidity of communication, in the form of dramaturgy, when added to the rather more entitative IMP model of Actors, Resources and Activities (Håkansson & Snehota, 1995) creates a more processual, theatrical ‘scenario’ of Actor-Characters, Resource Props and Scripted Activities. We employ the dramaturgical approach of Goffman (1956, 1961) which, in keeping with the approach of the IMP Group is centrally attentive to social interaction. In order to illustrate the potential contribution of this approach, we apply this dramaturgical perspective to the interactions described in a published case study (Helander & Möller, 2007, 2008a, 2008b).