Oligopoly Pricing: Old Ideas and New Tools

by Xavier Vives

Overview

The "oligopoly problem"—the question of how prices are formed when the market contains only a few competitors—is one of the more persistent problems in the history of economic thought. In this book Xavier Vives applies a modern game-theoretic approach to develop a theory of oligopoly pricing. Vives begins by relating classic contributions to the field—including those of Cournot, Bertrand, Edgeworth, Chamberlin, and Robinson—to modern game theory. In his discussion of basic game-theoretic tools and equilibrium, he pays particular attention to recent developments in the theory of supermodular games. The middle section of the book, an in-depth treatment of classic static models, provides specialized existence results, characterizations of equilibria, extensions to large markets, and an analysis of comparative statics with a view toward applied work. The final chapters examine commitment issues, entry, information transmission, and collusion using a variety of tools: two-stage games, the modeling of competition under asymmetric information and mechanism design theory, and the theory of repeated and dynamic games, including Markov perfect equilibrium and differential games.

Product Details

ISBN-13:	9780262720403
Publisher:	MIT Press
Publication date:	07/27/2001
Series:	The MIT Press
Edition description:	New Edition
Pages:	442
Product dimensions:	6.00(w) x 9.00(h) x 1.00(d)
Age Range:	18 Years

About the Author

Xavier Vives is Director of the Institut d'Anàlisi Econòmica, Barcelona.

Table of Contents

Preface
1 Ideas of the Founding Fathers: Oligopoly Theory and Modern
Game Theory
2 Game Theory Tools
2.1 Games in Normal Form and Nash Equilibrium
2.2 Supermodular Games and Lattice Programming
2.3 EXistence Results for Quasiincreasing and Decreasing Best
Replies
2.4 MiXed Strategies
2.5 Uniqueness
2.6 Stability
2.7 Incomplete information and Bayesian Nash Equilibrium
Summary
EXercises
3 Foundations of Partial Equilibrium Analysis
3.1 A Canonical Partial Equilibrium Model
3.2 Small EXpenditure Shares and Small Income Effects
AppendiX: Consumer Surplus Analysis
Summary
EXercises
4 Quantity Competition: The Cournot Model
4.1 The Model and EXistence of Equilibrium
4.2 Characterization of Smooth Cournot Games
4.3 Comparative Statics and Entry
4.4 Large Markets
Summary
EXercises
5 Price Competition: The Models of Bertrand and
Edgeworth
5.1 Bertrand Competition
5.2 BertrandEdgeworth Competition
Summary
EXercises
6 Product Differentiation
6.1 Demand Systems
6.2 Quantity and Price Competition
6.3 Characterization and Comparison of Cournot and Bertrand
Equilibria
6.4 Large Markets and Monopolistic Competition
6.5 BertrandEdgeworthChamberlin Competition
6.6 Monopolisitic Competition and Entry
AppendiX: Product Selection and Complementary Products
Summary
EXercises
7 Conjectures, Reactions, and Commitment
7.1 Conjectural Variations
7.2 Supply Functions
7.3 Collusion and Facilitating Practices
7.4 Commitment and Pricing
Summary
EXercises
8 Competition with Asymmetric Information
8.1 Static Competition with Incomplete Information
8.2 MonopolisticCompetition with Private Information
8.3 Information Sharing
8.4 Information EXchange, Collusion, and Mechanism
8.5 Commitment under Uncertainty and Information
Summary
EXercises
9 Repeated Interaction and Dynamics
9.1 Repeated Interaction and Collusion
9.2 Dynamic Pricing and Commitment
Summary
EXercises
10 Epilogue
Notes
References
IndeX

What People are Saying About This

Jonathan H. Hamilton

The clearest presentation of new results on existence of equilibria using lattice theory. An advanced student in industrial organization will find this a great resource on recent developments in oligopoly theory. It really helps prepare a student for research.

Michael Riordan

The great accomplishment of Industrial Organization is the application of game theory to the study of industry conduct. Xavier Vives provides an up-o-date and appreciative guide to that accomplishment.

Joseph Harrington

An exceedingly careful and thorough treatment of the theoretical stock of knowledge on imperfect competition by one of the best oligopoly theorists of his generation. Its extensive use of the theory of supermodular games makes this book truly unique and on the cutting edge. Its comprehensive coverage and attention to theoretical foundations and to proving results rigorously and with utmost generality means that scholars, not just students, will benefit from reading it.

Endorsement

Xavier Vives is one of the outstanding scholars of his generation in oligopoly and industrial organization theory. His book, Oligopoly Pricing, is learned, broad, deep, and up-to-date. He understands and explains well the originators from Cournot onward all the way to the most contemporary contributions.

—James W. Friedman, Kenan Professor of Economics, University of North Carolina

From the Publisher

The clearest presentation of new results on existence of equilibria using lattice theory. An advanced student in industrial organization will find this a great resource on recent developments in oligopoly theory. It really helps prepare a student for research.

—Jonathan H. Hamilton, Professor, University of Florida, and Editor, Southern Economic Journal

Xavier Vives provides a thorough and rigorous description of the theory of oligopoly pricing and its intellectual history. Graduate students in industrial organization, and others looking for a summary of recent developments, will benefit from reading this book by a leading scholar in the field.

—Robert Porter, William R. Kenan, Jr., Professor of Economics, Northwestern University

Xavier Vives has been one of the leading contributors to the modern theory of oligopoly. This book should prove an indispensable reference on the subject.

—Eric Maskin, Department of Economics, Harvard University

An exceedingly careful and thorough treatment of the theoretical stock of knowledge on imperfect competition by one of the best oligopoly theorists of his generation. Its extensive use of the theory of supermodular games makes this book truly unique and on the cutting edge. Its comprehensive coverage and attention to theoretical foundations and to proving results rigorously and with utmost generality means that scholars, not just students, will benefit from reading it.

—Joseph Harrington, Professor of Economics, The Johns Hopkins University

The great accomplishment of Industrial Organization is the application of game theory to the study of industry conduct. Xavier Vives provides an up-o-date and appreciative guide to that accomplishment.

—Michael Riordan, Professor of Economics, Columbia University

Xavier Vives is one of the outstanding scholars of his generation in oligopoly and industrial organization theory. His book, Oligopoly Pricing, is learned, broad, deep, and up-to-date. He understands and explains well the originators from Cournot onward all the way to the most contemporary contributions.

—James W. Friedman, Kenan Professor of Economics, University of North Carolina

Robert Porter

Xavier Vives provides a thorough and rigorous description of the theory of oligopoly pricing and its intellectual history. Graduate students in industrial organization, and others looking for a summary of recent developments, will benefit from reading this book by a leading scholar in the field.

Eric Maskin

Xavier Vives has been one of the leading contributors to the modern theory of oligopoly. This book should prove an indispensable reference on the subject.

James W. Friedman

Xavier Vives is one of the outstanding scholars of his generation in oligopoly and industrial organization theory. His book, Oligopoly Pricing, is learned, broad, deep, and up-to-date. He understands and explains well the originators from Cournot onward all the way to the most contemporary contributions.