NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Martin Byford

Department of Economics
RMIT University GPO Box 2476
Melbourne, Victoria 3001 Australia

E-Mail: martin.byford@rmit.edu.au

NBER Working Papers and Publications

September 2014Permission to Exist
with Joshua S. Gans: w20512
We provide a new model that generates persistent performance differences amongst seemingly similar enterprises. Our model provides a mechanism whereby efficient incumbent rivals can give permission for an inefficient firm to exist in the presence of efficient entrants. We demonstrate that, in a repeated game, an efficient incumbent has a unilateral incentive to establish a relational contract that softens price competition to either strengthen the inefficient firm in a war of attrition that emerges post-entry or reduce the value to the inefficient firm of selling its position to entrants. The paper provides conditions under which that equilibrium exists and derives a number of empirical predictions as implications of the model. It is demonstrated that performance differences are likely to ...
May 2014Collusion at the Extensive Margin
with Joshua S. Gans: w20163
We augment the multi-market collusion model of Bernheim and Whinston (1990) by allowing for firm entry into, and exit from, individual markets. We show that this gives rise to a new mechanism by which a cartel can sustain a collusive agreement: Collusion at the extensive margin whereby firms collude by avoiding entry into each other's markets or territories. We characterise parameter values that sustain this type of collusion and identify the assumptions where this collusion is more likely to hold than its intensive margin counterpart. Specifically, it is demonstrated that Where duopoly competition is fierce collusion at the extensive margin is always sustainable. The model predicts new forms of market sharing such as oligopolistic competition with a collusive fringe, and predatory entry. ...

Published: Byford, Martin C. & Gans, Joshua S., 2014. "Collusion at the extensive margin," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 75-83. citation courtesy of

 
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