Postprint version. Published in International Journal of Industrial Organization, Volume 17, Issue 2, February 1, 1999, pages 259-275. Copyright © 1999 Elsevier Science B.V. All rights reserved. The definitive version is available at http://dx.doi.org/10.1016/S0167-7187(97)00038-6.
NOTE: At the time of publication, the author Stephen Hamilton was not yet affiliated with Cal Poly.
This papers examines the structural implications of demand shifts in free-entry oligopoly equilibria. The model generalizes the conjectural variations framework to consider asymmetric firm conjectures, allows for the possibility of cost differences across firms, and endogenizes conditions of entry and exit in the industry. In non-competitive environments, changes in incumbent output and industry profitability are inversely-related to changes in the equilibrium price following a demand shift. In response to rotations of demand through the equilibrium point, changes in profitability are positively-related to changes in industry concentration and, when marginal costs are non-decreasing, inversely-related to changes in market power.