Abstract
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.
Original language | English (US) |
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Pages (from-to) | 3339-3364 |
Number of pages | 26 |
Journal | American Economic Review |
Volume | 109 |
Issue number | 9 |
DOIs | |
State | Published - Sep 2019 |
ASJC Scopus subject areas
- Economics and Econometrics
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Replication data for: How Efficient Is Dynamic Competition? The Case of Price as Investment
Besanko, D. (Creator), Doraszelski, U. (Creator) & Kryukov, Y. (Creator), ICPSR - Interuniversity Consortium for Political and Social Research, 2019
DOI: 10.3886/e116206v1, https://www.openicpsr.org/openicpsr/project/116206/version/V1/view
Dataset
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Replication data for: How Efficient Is Dynamic Competition? The Case of Price as Investment
Besanko, D. (Creator), Doraszelski, U. (Creator) & Kryukov, Y. (Creator), ICPSR - Interuniversity Consortium for Political and Social Research, 2019
DOI: 10.3886/e116206, https://www.openicpsr.org/openicpsr/project/116206
Dataset