Raymond J. Deneckere
University of Wisconsin-Madison
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Featured researches published by Raymond J. Deneckere.
The RAND Journal of Economics | 1985
Raymond J. Deneckere; Carl Davidson
In this article we investigate the incentive to merge when firms that produce differentiated products engage in price competition. We demonstrate that mergers of any size are beneficial and are so increasingly: large mergers yield higher profits than smaller ones. This is in contrast to the result that mergers tend to be disadvantageous in quantity-setting games. This qualitative difference follows from the fact that reaction functions are typically upward sloping in price games but downward sloping in quantity games. Thus, the reaction of outsiders reinforces the initial price increase that results from the merger.
The RAND Journal of Economics | 1986
Carl Davidson; Raymond J. Deneckere
In this article we investigate the nature of equilibrium in markets in which firms choose the scale of operation before they make pricing decisions. We analyze a duopoly model in which firms choose their capacities before engaging in Bertrand-like price competition. We demonstrate that the Cournot outcome is unlikely to emerge in such markets and that the equilibrium tends to be more competitive than the Cournot model would predict. In addition, our results indicate a tendency toward asymmetric firm sizes and price dispersion that results from the mixed strategies firms use in equilibrium.
International Economic Review | 1990
Carl Davidson; Raymond J. Deneckere
In this paper, the authors analyze a restricted class of equilibria in the dynamic model of J. P. Benoit and V. Krishna (1987) in which firms choose their scale of operation before engaging in a repeated game of price competition. Benoit and Krishna established that all firms carry excess capacity in all collusive equilibria. As the authors are interested in the relationship between excess capacity and collusion in price, they examine equilibria in which firms tacitly collude in price, but not in investment decisions. Copyright 1990 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
Quarterly Journal of Economics | 1996
Raymond J. Deneckere; Howard P. Marvel; James Peck
We show that a manufacturer facing uncertain demand and selling through a competitive retail market may wish to support adequate retail inventories by preventing the emergence of discount retailers. In our model, discounters offer low prices made possible by low probability of being saddled with unsold inventories in the event of slack demand. Full-price retailers are compensated for a higher probability of unsold inventories by a higher retail price when they sell. We show that preventing discounting increases the manufacturers wholesale demand and profits, and we delineate demand conditions under which equilibrium inventory holding and consumer welfare increase.
Journal of Industrial Economics | 1992
Raymond J. Deneckere; Dan Kovenock; Robert Lee
This paper analyzes a duopolistic price setting game in which firms have loyal consumer segments but cannot distinguish them from price-sensitive consumers. The authors adapt a variant of H. Varians (1980) simultaneous price setting game to analyze price-leader equilibria. The properties of the price-leader equilibria with an exogenously specified leader motivate the construction of a game of timing in which the firm with the larger segment of loyal consumers becomes an endogenous price leader. This demonstrates that consumer loyalty may play an important role in establishing the existence and identity of a price leader. Copyright 1992 by Blackwell Publishing Ltd.
The RAND Journal of Economics | 1987
Lawrence M. Ausubel; Raymond J. Deneckere
It has been argued that two factors -- product durability and (potential) entry -- may force a monopolist to price at marginal cost. This article shows that when these two forces coexist, the tendency toward competition may be negated. First, we prove that durable goods oligopolists without commitment powers may attain joint profits arbitrarily close to those of a monopolist with perfect commitment power. Second, we demonstrate that the presence of a potential entrant may enable a durable goods monopolist to act as if he had commitment power. Thus, potential as well as actual entry may restore monopoly power.
International Journal of Industrial Organization | 1984
Carl Davidson; Raymond J. Deneckere
Abstract In the Industrial Organization literature, it is generally felt that mergers hurt consumers; not only because of the increased industrial concentration they effect, but also because collusion becomes more likely. In this paper we show that, at least in one important case, this intuition is misguided. If a tacitly collusive agreement enforced by trigger strategies is not initially sustainable, mergers will tend to reduce the chance that it becomes sustainable in the future. This is so because the threat point implicit in the agreement becomes more favorable for outsiders.
The Review of Economic Studies | 1992
Raymond J. Deneckere; Michael Rothschild
This paper presents a general model of the demand for differentiated products which has as special cases two popular models used to analyse welfare and competition in monopolistically competitive markets: the model of spatial competition and the symmetric aggregate benefit function approach. Our model is especially attractive because it starts from economic primitives: a specification of the set of possible individual preference patterns. It shows how specific properties of the distribution of preferences translate into properties of aggregate demand. This allows us to understand the relationship between the distribution of preferences and the degree to which the market introduces biases in product selection.
Journal of Economic Dynamics and Control | 1990
Michele Boldrin; Raymond J. Deneckere
This paper develops a tractable multisectoral dynamic equilibrium model and provides a fairly complete analysis of the dynamics that may arise along the intertemporal competitive equilibrium path. Despite the fact that the environment displays neither random nor deterministic variability, the model may produce oscillations in aggregate variables such as output. consumption, and investment. We show that these oscillations can be exactly periodic, of any finite period ,I. and even totally aperiodic (chaotic). We characterize the parameter values for which each of these cases occur. but also provide some strong global asymptotic stability results.
Journal of Economic Theory | 1989
Lawrence M. Ausubel; Raymond J. Deneckere
We characterize the sequential equilibria of a class of infinite-horizon bargaining games with one-sided incomplete information. When the seller (the uninformed party) makes all the offers, we prove a folk theorem: every incentive compatible, individually rational, direct bargaining mechanism is implementable by sequential equilibria. Introducing buyer counteroffers eliminates outcomes which are unfavorable to that party. As the proportion of buyer offers increases, the set of implementable mechanisms shrinks continuously; when the proportion reaches one, only the single outcome most favorable to the buyer remains. Thus, depending on the offer structure, sequentiality may (or may not) impose restrictions beyond static incentive compatibility.