Oblivious Equilibrium for Concentrated Industries

56 Pages Posted: 10 Aug 2013 Last revised: 8 Oct 2014

See all articles by C. Lanier Benkard

C. Lanier Benkard

Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Przemyslaw Jeziorski

University of California, Berkeley - Haas School of Business

Gabriel Y. Weintraub

Stanford Graduate School of Business, Stanford University; Columbia University - Columbia Business School - Decision Risk and Operations

Date Written: August 2013

Abstract

This paper explores the application of oblivious equilibrium to concentrated industries. We define an extended notion of oblivious equilibrium that we call partially oblivious equilibrium (POE) that allows for there to be a set of "dominant firms'', whose firm states are always monitored by every other firm in the market. We perform computational experiments that show that POE are often close to MPE in concentrated industries with characteristics similar to real world industries even when OE are not. We derive error bounds for evaluating the performance of POE when MPE cannot be computed. Finally, we demonstrate an important trade-off facing empirical researchers between implementing an equilibrium concept that is computationally light in a richer economic model, and implementing MPE in a simpler one.

Suggested Citation

Benkard, C. Lanier and Jeziorski, Przemyslaw and Weintraub, Gabriel Y., Oblivious Equilibrium for Concentrated Industries (August 2013). NBER Working Paper No. w19307. Available at SSRN: https://ssrn.com/abstract=2308275

C. Lanier Benkard (Contact Author)

Stanford Graduate School of Business ( email )

Stanford, CA 94305-5015
United States
650-723-4124 (Phone)
650-725-0468 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Przemyslaw Jeziorski

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

Gabriel Y. Weintraub

Stanford Graduate School of Business, Stanford University ( email )

Stanford, CA 94305
United States

Columbia University - Columbia Business School - Decision Risk and Operations ( email )

New York, NY
United States

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