A Note on Additional Materials for 'Feedback and Contagion Through Distressed Competition'

21 Pages Posted: 31 Aug 2023 Last revised: 22 Feb 2024

See all articles by Hui Chen

Hui Chen

Massachusetts Institute of Technology

Winston Wei Dou

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Hongye Guo

The University of Hong Kong - University of Hong Kong

Yan Ji

Hong Kong University of Science & Technology (HKUST)

Date Written: August 17, 2023

Abstract

This note contains a continuous-time version of the full-fledged quantitative model in the paper titled “Feedback and Contagion through Distressed Competition” (Chen et al., 2023a). Section 1 develops the model in continuous time and provides additional discussions on the literature. Section 2 clarifies some technical conditions for the boundary conditions of the continuous-time model. Section 3 provides the numerical algorithm that solves the continuous-time model using a discrete-time dynamic programming method. Moreover, an internet appendix (Chen et al., 2023b) provides empirical evidence supporting the theoretical results, as well as additional analyses of the full-fledged quantitative model.

Keywords: Competition-distress feedback loop, Distress spillover, Predatory pricing, Price war, Profitability-leverage puzzle, Collusion

JEL Classification: C73, D43, E31, G3, L13, O33

Suggested Citation

Chen, Hui and Dou, Winston Wei and Guo, Hongye and Ji, Yan, A Note on Additional Materials for 'Feedback and Contagion Through Distressed Competition' (August 17, 2023). Available at SSRN: https://ssrn.com/abstract=4543458 or http://dx.doi.org/10.2139/ssrn.4543458

Hui Chen

Massachusetts Institute of Technology ( email )

50 Memorial Drive
Cambridge, MA 02142
United States
+1 (617) 324-3896 (Phone)

Winston Wei Dou (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
United States

HOME PAGE: http://www.nber.org/people/winston_wei_dou?page=1&perPage=50

Hongye Guo

The University of Hong Kong - University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Hong Kong
China

Yan Ji

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

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