Sensitivity analysis of markup equilibria in complementary markets |
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| Authors: | José R. Correa,Roger Lederman,Nicolá s E. Stier-Moses |
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| Affiliation: | 1. Departamento de Ingeniería Industrial, Universidad de Chile, Santiago, Chile;2. IBM T. J. Watson Research Center, Yorktown Heights, NY, USA;3. Graduate School of Business, Columbia University, NY, USA;4. School of Business, Universidad Torcuato Di Tella, Buenos Aires, Argentina;5. CONICET, Argentina |
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| Abstract: | We study the competitive structure of a market in which firms compete to provide various products within a bundle. Firms adopt price functions proportional to their per-unit costs by selecting markups. We consider two measures reflecting, respectively, the intensity of direct competition and the impact of complementarity on each producer’s markup. We characterize the sensitivity of these terms to various changes in the market structure and relate this to changes in producer profits and the social efficiency of the market. |
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| Keywords: | Noncooperative games Oligopoly models Supply function equilibrium Bundling Pricing Sensitivity analysis |
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