Title
Market equilibrium strategies under learning by doing and spillovers
Author
Abstract
We investigate intertemporal strategic interactions if monopolies, cartels, or oligopolies benefit from firm internal as well as external learning by doing. Our analysis is carried out for a linear learning cost curve, which allows the derivation of the linear Markov perfect equilibrium (LMPE). The model yields surprising properties: First and highly policy-relevant is the non-existence of equilibria except for very few firms and sufficiently large spillovers, although the corresponding open loop as well as the collusive (cartel) equilibria and the monopoly solution exist. This analytical result corroborates the empirical evidence on the many bankruptcies in the solar photovoltaic market. Second, from a policy perspective, learning could justify a restriction on the number of competitors in the marketplace, in particular if it is very effective. Third, surprising and of theoretical interest is that the linear (and symmetric) Markov perfect equilibrium need not be unique, which is a novel outcome for meaningful economic models.
Keywords
Learning by doingDifferential gameCompetitionSpilloversSolar PVLinear Markov perfect equilibrium
Object type
Language
English [eng]
Persistent identifier
Appeared in
Title
Energy Economics
Volume
131
ISSN
0140-9883
Issued
2024
Publication
Elsevier BV
Version type
Date issued
2024
Access rights
Rights
Rights statement
© 2024 The Author(s)
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