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Do Other Firms Matter in Oligopolies?[Note 1. We are very grateful to Harry Bloch, Ben Fine, ...]
Author(s) -
Haskel Jonathan,
Scaramozzino Pasquale
Publication year - 1997
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/1467-6451.00033
Subject(s) - cournot competition , novelty , oligopoly , homogeneous , measure (data warehouse) , affect (linguistics) , microeconomics , economics , econometrics , mathematics , computer science , psychology , social psychology , communication , combinatorics , database
This paper examines how firms interact with their rivals. The main novelty of our approach is that we let conjectural variations depend on the actual ability of other firms to react, which we measure by both the physical capacity and financial status of firms. Our main findings are twofold. First, physical and financial capacity significantly affect conjectures. Second, we recover the implied conjectural variations and reject homogeneous conjectures. We generally find that leaders expect aggressive responses, and followers are Cournot players.