|How Efficient is Dynamic Competition? The Case of Price as Investment|
with , : w23829
We study industries where the price that a firm sets serves as an investment into lower cost or higher demand. We assess the welfare implications of the ensuing competition for the market using analytical and numerical approaches to compare the equilibria of a learning-by-doing model to the first-best planner solution. We show that dynamic competition leads to low deadweight loss. This cannot be attributed to similarity between the equilibria and the planner solution. Instead, we show how learning-by-doing causes the various contributions to deadweight loss to either be small or partly offset each other.
Published: David Besanko & Ulrich Doraszelski & Yaroslav Kryukov, 2019. "How Efficient Is Dynamic Competition? The Case of Price as Investment," American Economic Review, vol 109(9), pages 3339-3364.
|Ownership Concentration and Strategic Supply Reduction|
with , , : w23034
We explore the implications of ownership concentration for the recently-concluded incentive auction that re-purposed spectrum from broadcast TV to mobile broadband usage in the U.S. We document significant multi-license ownership of TV stations. We show that in the reverse auction, in which TV stations bid to relinquish their licenses, multi-license owners have an incentive to withhold some TV stations to drive up prices for their remaining TV stations. Using a large-scale valuation exercise, we find that this strategic supply reduction conservatively increases payouts to TV stations by between 7.0% and 20.7%.
|Just Starting Out: Learning and Equilibrium in a New Market|
with , : w21996
We document the evolution of the newly created market for frequency response within the UK electricity system over a six-year period. Firms competed in price while facing considerable initial uncertainty about market demand and rival behavior. We show that over time prices stabilized, converging to a rest point that is consistent with equilibrium play, and then adjusted to subsequent changes in the market quite quickly. We draw on models of fictitious play and adaptive learning to analyze how this convergence occurs and show that these models predict behavior better than Nash equilibrium prior to convergence.
Published: Ulrich Doraszelski & Gregory Lewis & Ariel Pakes, 2018. "Just Starting Out: Learning and Equilibrium in a New Market," American Economic Review, vol 108(3), pages 565-615. citation courtesy of
|The Role of Permanent Income and Demographics in Black/White Differences in Wealth|
with : w8473
We explore the extent to which the huge race gap in wealth can be explained with properly constructed income and demographic variables. In some instances we explain the entire wealth gap with income and demographics provided that we estimate the wealth model on a sample of whites. However, we typically explain a much smaller fraction when we estimate the wealth model on a black sample. Using sibling comparisons to control for intergenerational transfers and the effects of adverse history, we find that differences in income and demographics are not likely to account for the lower explanatory power of the black wealth models. Our analysis of growth models of wealth suggests that differences in savings behavior and/or rates of return play an important role.
Published: Altonji, Joseph G. and Ulrich Doraszelski. "The Role of Permanent Income and Demographics in Black/White Differences in Wealth." Journal of Human Resources 40, 1 (Winter 2005): 1-30. citation courtesy of