A Dynamic Quality Ladder Model with Entry and Exit: Exploring the Equilibrium Correspondence Using the Homotopy Method

Borkovsky, Ron N.; Doraszelski, Ulrich; Kryukov, Yaroslav

doi:10.2139/ssrn.1502860

Cited by 12 publications

(20 citation statements)

References 48 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Next, when the probability of large unexpected changes in costs is high, the laggard 23 In declaring an action predatory, we follow Cabral and Riordan (1997) who define an action as predatory if "i) a different action would increase the likelihood that rivals remain viable, and ii) the different action would be more profitable under the counterfactual hypothesis that the rival's viability were unaffected" (p. 160). Our interpretation is similar to that of Borkovsky et al (2012) who consider predatory investment in a dynamic quality ladder model. does not give up that fast when falling behind as it is still possible for him to catch up the leader if he has a run of luck.…”

Section: Low Spilloverssupporting

confidence: 81%

Research Among Copycats: R&D, Spillovers, and Feedback Strategies

Smrkolj

Wagener

2014

SSRN Journal

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We study a stochastic dynamic game of process innovation in which firms can initiate and terminate R&D efforts and production at different times. We discern the impact of knowledge spillovers on the investments in existing markets, as well as on the likely structure of newly forming markets, for all possible asymmetries between firms. We show that the relation between spillovers, R&D efforts, and surpluses is non-monotonic and dependent on both the relative and absolute efficiency of firms. Larger spillovers increase the likelihood that a new technology is brought to production, but they do not necessarily make the industry more competitive. Terms of use: Documents in

show abstract

Section: Low Spilloverssupporting

confidence: 81%

Research Among Copycats: R&D, Spillovers, and Feedback Strategies

Smrkolj

Wagener

2014

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…Doraszelski and Satterthwaite, 2007;Borkovsky et al, 2009;Besanko et al, 2010). Borkovsky et al (2009) present evidence that the possibility of entry and exit may increase the likelihood of multiple equilibria. While I consistently converged to the same equilibrium for my baseline parameterization, for robustness checks examining a substantially larger increase in firms' marginal costs I did find evidence of possible multiple equilibria.…”

Section: The Effect Of Regulatory Uncertainty On Investmentmentioning

confidence: 87%

“…However, several recent articles have found them (e.g. Doraszelski and Satterthwaite, 2007;Borkovsky et al, 2009;Besanko et al, 2010). Borkovsky et al (2009) present evidence that the possibility of entry and exit may increase the likelihood of multiple equilibria.…”

Section: The Effect Of Regulatory Uncertainty On Investmentmentioning

confidence: 95%

Uncertain regulatory timing and market dynamics

Wilson

2012

International Journal of Industrial Organization

View full text Add to dashboard Cite

“…To thoroughly explore the equilibrium correspondence and search for multiple equilibria in a systematic fashion, we use the homotopy or path-following method in Besanko et al (2010). 16 We caution that the homotopy algorithm cannot be guaranteed to find all equilibria and refer to reader to Besanko et al (2010) and Borkovsky, Doraszelski & Kryukov (2010, 2012 for additional discussion. We solve the first-best planner problem using value function iteration combined with quasi-Monte Carlo integration (Halton sequences of length 10, 000) to evaluate the operating probabilities in equation (7) and the Bellman equation (8). Our learning-by-doing model has four key parameters: the progress ratio ρ ∈ [0, 1], the degree of product differentiation σ > 0, the price of the outside good p 0 = c 0 ≥ 0, and the expected scrap value X ∈ [−∆ X , S + ∆ S + ∆ X ].…”

Section: Computation and Parameterizationmentioning

confidence: 99%

How Efficient Is Dynamic Competition? The Case of Price as Investment

Besanko¹,

Doraszelski²,

Kryukov

2019

American Economic Review

Self Cite

View full text Add to dashboard Cite

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. AbstractWe 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. * We thank

show abstract

A Dynamic Quality Ladder Model with Entry and Exit: Exploring the Equilibrium Correspondence Using the Homotopy Method

Cited by 12 publications

References 48 publications

Research Among Copycats: R&D, Spillovers, and Feedback Strategies

Research Among Copycats: R&D, Spillovers, and Feedback Strategies

Uncertain regulatory timing and market dynamics

How Efficient Is Dynamic Competition? The Case of Price as Investment

Contact Info

Product

Resources

About