Analysis on Competition Policy：竞争政策分析.pdf

Analysis on Competition Policy Hongbin Cai Peking University Novemeber 2007 Content Collusion ——Competitors act as a single firm. Horizontal Mergers —— Competitors join to form a single firm. Monopolization ——The preexisting single firm makes its own decision. Preliminary Knowledge Cournot Equilibrium It is a classic model of Nash Equilibrium, where a small number of firms produce homogeneous products and simultaneously decide their own output levels respectively. Bertrand Equilibrium It is a classic model of Nash Equilibrium, where a small number of firms simultaneously decide the price for the products. Market Power It is a fundamental concept to antitrust economics and to the law. It is a natural measure how much power over price a firm owns in a certain market. Cournot Equilibrium Suppose there are N firms in a certain market. They produce homogeneous products and simultaneously decide their own output level. We denote Qi as the output level of firm i with a cost function c (Q ) . i i The market price associated with the aggregate N N output ∑Q ,is taken to be P ( Q ) (Demand i ∑ i i 1 Function). i 1 Cournot Equilibrium Firm i’s maximization problem is N π(Q , Q ) P(∑Q )Q =−c (Q ) max i −i i i i i Qi i 1 Cournot assumed an interior optimum for each firm. The first-order condition is ∂π(Q , Q− ) N N i i P (∑Q )Q =+P (∑Q ) −c (Q )