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Pré-Publication, Document De Travail (Working Paper) Année : 2022

Taking firms’ margin targets seriously in a model of competition in supply functions

Denis Claude
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Résumé

We introduce price-markup objectives into a model of supply function competition. We characterize the corresponding supply-function equilibrium and study its qualitative properties. Adherence to price-markup targets is conducive to reduced market competition and increased firm profitability. While pursuing such goals reduces social welfare, welfare never drops below the level corresponding to a Cournot oligopoly. Finally, we establish conditions under which consumer preference for fair pricing inhibits the industry's use of markups as a collusive device.
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Dates et versions

hal-03548797 , version 1 (31-01-2022)

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  • HAL Id : hal-03548797 , version 1

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Denis Claude, Mabel Tidball. Taking firms’ margin targets seriously in a model of competition in supply functions. 2022. ⟨hal-03548797⟩
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