C. Cox
Two-period duopolies with forward markets
Cox, C.; Karam, A.; Pelster, M.
Abstract
We experimentally consider a dynamic multi-period Cournot duopoly with a simultaneous option to manage financial risk and a real option to delay supply. The first option allows players to manage risk before uncertainty is realized, while the second allows managing risk after realization. In our setting, firms face a strategic dilemma: They must weigh the advantages of dealing with risk exposure against the disadvantages of higher competition. In theory, firms make strategic use of the hedging component, enhancing competition. Our experimental results support this theory, suggesting that hedging increases competition and negates duopoly profits even in a simultaneous setting.
Journal Article Type | Article |
---|---|
Acceptance Date | Aug 25, 2021 |
Online Publication Date | Sep 4, 2021 |
Publication Date | 2022-02 |
Deposit Date | Oct 24, 2019 |
Publicly Available Date | Sep 4, 2022 |
Journal | Review of Industrial Organization |
Print ISSN | 0889-938X |
Electronic ISSN | 1573-7160 |
Publisher | Springer |
Peer Reviewed | Peer Reviewed |
Volume | 60 |
Issue | 1 |
Pages | 29-62 |
DOI | https://doi.org/10.1007/s11151-021-09839-6 |
Public URL | https://durham-repository.worktribe.com/output/1287037 |
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Copyright Statement
This is a post-peer-review, pre-copyedit version of a journal article published in Review of Industrial Organization. The final authenticated version is available online at: https://doi.org/10.1007/s11151-021-09839-6
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