Unsystematic Risk and Coalition Formation in Product Markets

32 Pages Posted: 23 Aug 1999

See all articles by Murray Brown

Murray Brown

SUNY at Buffalo, College of Arts & Sciences, Department of Economics

Shin-Hwan Chiang

York University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: July 1999

Abstract

We study the conjecture that increasing market volatility leads to larger coalitions in an oligopoly. Here, coalition formation decisions are made in a noncooperative game by risk averse firms. They use a sequential offer-counter-offer procedure initiated by Selten and Rubinstein. We find that the conjecture generally fails in a small oligopoly whose firms play a unanimity game but it is validated in an oligopoly that allows open membership. However, it is valid in a small oligpoly if market volatility is sufficiently high, whatever the rule of membership.

JEL Classification: C72, L13

Suggested Citation

Brown, Murray and Chiang, Shin-Hwan, Unsystematic Risk and Coalition Formation in Product Markets (July 1999). Available at SSRN: https://ssrn.com/abstract=171087 or http://dx.doi.org/10.2139/ssrn.171087

Murray Brown (Contact Author)

SUNY at Buffalo, College of Arts & Sciences, Department of Economics ( email )

Fronczak Hall
Buffalo, NY 14260
United States
716-838-1941 (Phone)
716-645-2127 (Fax)

Shin-Hwan Chiang

York University - Department of Economics ( email )

4700 Keele St.
Toronto, Ontario M3J 1P3
Canada
416-736-5083 (Phone)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
129
Abstract Views
1,379
Rank
395,656
PlumX Metrics