Theory/Experimental seminar: Ben Golub (Northwestern)

We study a differentiated oligopoly game: firms simultaneously set prices, and then consumers with arbitrary preferences choose how much of each good to buy. The equilibrium is inefficient due to market power. Its comparative statics are rich because of the strategic interactions between firms’ pricing problems. We study how changes in costs, via exogenous shocks or taxes, pass through to prices and surplus. A key tool is a change of basis that relates the market to a fictitious one served by firms that do not interact strategically. We apply the tool to study some canonical tax and subsidy problems and show that markets with more diversity in their strategic structure permit offer more leverage per unit of taxing power.

Meet the speaker

118 Chandler House or Zoom