Year: 2025
Type: article
Abstract: We extend Deneckere and Davidson’s model on firms’ incentives to form coalitions to predict which firms are more likely to enter a coalition. In Deneckere and Davidson, all firms have the same incentives to enter a coalition because they are all symmetric and therefore choose symmetric prices. We modify their demand specification to include different cross-price elasticities. With this, we can generate market equilibria where firms have different prices, and therefore different incentives to enter a coalition. Our modified model can inform the construction and estimation of empirical models of coalitions and price formation.
Source: Theoretical Economics Letters
Authors: Armando Jose Garcia Pires, Frode Skjeret
Institution: Norwegian School of Economics
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W4411654440