Columbia Business School, Uris 402
New York, NY 10027, U.S.A.
NBER Working Papers and Publications
|August 2013||Oblivious Equilibrium for Concentrated Industries|
with C. Lanier Benkard, Przemyslaw Jeziorski: w19307
This paper explores the application of oblivious equilibrium to concentrated industries. We define an extended notion of oblivious equilibrium that we call partially oblivious equilibrium (POE) that allows for there to be a set of "dominant firms'', whose firm states are always monitored by every other firm in the market. We perform computational experiments that show that POE are often close to MPE in concentrated industries with characteristics similar to real world industries even when OE are not. We derive error bounds for evaluating the performance of POE when MPE cannot be computed. Finally, we demonstrate an important trade-off facing empirical researchers between implementing an equilibrium concept that is computationally light in a richer economic model, and implementing MPE in...
Published: Oblivious equilibrium for concentrated industries C. Lanier Benkard1, Przemyslaw Jeziorski2 andGabriel Y. Weintraub3 The RAND Journal of Economics Volume 46, Issue 4, pages 671–708, Winter 2015
|August 2010||Industry Dynamics: Foundations For Models with an Infinite Number of Firms|
with C. Lanier Benkard, Benjamin Van Roy: w16286
This paper explores the connection between three important threads of economic research offering different approaches to studying the dynamics of an industry with heterogeneous firms. Finite models of the form pioneered by Ericson and Pakes (1995) capture the dynamics of a finite number of heterogeneous firms as they compete in an industry, and are typically analyzed using the concept of Markov perfect equilibrium (MPE). Infinite models of the form pioneered by Hopenhayn (1992), on the other hand, consider an infinite number of infinitesimal firms, and are typically analyzed using the concept of stationary equilibrium (SE). A third approach uses oblivious equilibrium (OE), which maintains the simplifying benefits of an infinite model but within the more realistic setting of a finite model....
Published: Industry Dynamics: Foundations for Models with an Innite Number of Firms," (with Gabriel Weintraub and Benjamin Van Roy), Journal of Economic Theory , September 2011.
|December 2005||Markov Perfect Industry Dynamics with Many Firms|
with C. Lanier Benkard, Ben Van Roy: w11900
We propose an approximation method for analyzing Ericson and Pakes (1995)-style dynamic models of imperfect competition. We develop a simple algorithm for computing an ``oblivious equilibrium,'' in which each firm is assumed to make decisions based only on its own state and knowledge of the long run average industry state, but where firms ignore current information about competitors' states. We prove that, as the market becomes large, if the equilibrium distribution of firm states obeys a certain ``light-tail'' condition, then oblivious equilibria closely approximate Markov perfect equilibria. We develop bounds that can be computed to assess the accuracy of the approximation for any given applied problem. Through computational experiments, we find that the method often generates useful app...
Published: Weintraub, Gabriel, C. Lanier Benkard and Ben Van Roy. "Markov Perfect Industry Dynamics with Many Firms." Econometrica (Nov 2008): 1375-1411.