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Article

v. 7 iss. 2 pp. 231-242
An Empirical Test of the Effects of Excess Capacity in Price Setting, Capacity-Constrained Supergames
International Journal of Industrial Organization (1989)

 

In a multi-period game, industry excess capacity may act to deter firms from cheating on a non-cooperative oligopoly price. A model is developed that translates the deterrrent influence of excess capacity into predictions about the relationship between excess capacity and oligopoly price-cost margins. The model is tested with time-series data from the U.S. aluminum industry. Results are consistent with those predicted by the model.


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About the Researcher
David I. Rosenbaum
Interim Associate Dean, College of Business Administration
Professor of Economics Associate Director for Academic Affairs/Business Raikes School of Computer Science & Management

Department: Economics

Ph.D., University of Wisconsin--Madison
 



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