Research

An Empirical Test of the Effects of Excess Capacity in Price Setting, Capacity-Constrained Supergames

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.

Publication Information
Article Title: An Empirical Test of the Effects of Excess Capacity in Price Setting, Capacity-Constrained Supergames
Journal: International Journal of Industrial Organization (1989)
v. 7 iss. 2 pp. 231-242
Author(s): Rosenbaum, David I
Researcher Information
    
Rosenbaum, David I
Rosenbaum, David I
Associate Director of the Bureau of Business Research,
Expertise:
  • Forensic Economics
  • Applied Microeconomics
  • Cost-Benefit Analysis
Economics
CoB 525 J
P.O. Box 880489
University of Nebraska-Lincoln
Lincoln, NE 68588-0489, USA
Phone: (402) 472-2318
Fax: (402) 472-9700
drosenbaum1@unl.edu