Bobtcheff, Catherine, Crampes, Claude and Lefouili, Yassine (2018) Demand Shocks, Learning-by-Doing and Exclusion. TSE Working Paper, n. 18-911, Toulouse

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This note examines how an exogenous industry-wide demand shock, such as the one resulting from the use of governmental subsidies, affects the exclusionary potential of learning-by-doing. We develop a two-period duopoly model in which an increase in a firm's first-period output leads to a decrease in its second-period marginal cost, and apply it to two special scenarios: one in which demand and learning technologies are linear and one in which firms are infinitely impatient. In the first scenario, we establish that a positive demand shock amplifies the exclusionary effect of learning-by-doing if and only if firms are sufficiently asymmetric in their learning abilities. In the second scenario, we emphasize the key role of the demand curvature as a determinant of the effect of a demand shock on the exclusionary potential of learning-by-doing.

Item Type: Monograph (Working Paper)
Language: English
Date: April 2018
Place of Publication: Toulouse
Uncontrolled Keywords: Demand shocks, learning-by-doing, market structure, exit
JEL Classification: D11 - Consumer Economics - Theory
L13 - Oligopoly and Other Imperfect Markets
Q4 - Energy
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 24 Apr 2018 11:32
Last Modified: 02 Apr 2021 15:57
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