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Imdustrial Orgamizatiom amd Price Amalysis

8/13/2018

金融学经济学代写 Download the dataset “electricity”. The file includes hypothetical data on variables related to the electricity market over 200 days.

1.Consider a spot market of electricity, where n identical firms are producing a homogeneous product (electricity) in a Cournot fashion.  金融学经济学代写

The anti-trust authority is concerned about conducts of those n firms. In particular, they doubt that n firms are somehow colluding. Assume that the marginal cost of each firm is given by

where Z_t is the strength of wind that shifts the marginal cost. c_t summarizes all the unobservable variables that we assume are uncorrelated with Z_t. We assume that each firm will produce the same amount, so averaging the marginal cost over firms gives the industry-level marginal cost:

where    I  put  a  superscript  s  to  Ø  to  emphasize  that  M C  is  a  function  of  quantity  supplied. Demand is given by

where E_t is the average temperature in t, and o_t summarizes all the unobservable that are assumed to be uncorrelated with temperature. The price coefficient can take two different values:

(a)Letting write down a firm‘s first order condition. Hint: write down the profit, and take the first order condition with respect to q_s. Your first order condition will include M C_s (Z_t, q_s) , ,and 8.

(b)Provethat aggregate first order condition is written as

where . Hint:  use the relationship in (1).

(c)Using(2) and (3), derive the following pricing equation:

where

(d)Download the dataset “electricity”. The file includes hypothetical data on variables related to the electricity market over £00 days. For each day, there are the price (p_t), the quantity supplied (Ø^s), the average temperature of the day (E_t), the strength of wind (Z_t), and the weekend index (fi if  it‘s weekend and zero otherwise). Suppose that there are 8 firms in the market.

i.If firms are colluding, we expect the price to be If you look at the data, the price is high for some days, while the price is low for other days. Can we conclude that firms are colluding when the observed price is high?Explain.  金融学经济学代写

ii.Estimate the demand function (2) by the OLS. What are your α andØmeehda4 , Ømeehend ? Are they reasonable? If not, explain possible reasons for your unreasonable result.

iii.Nowwe estimate the conduct parameter ¯8θ. First, estimate demand with the IV method.

iv.Assumeα^  and (Ø^meehda4 , Ø^meehend) you obtained in (iii) are the true values.  Then, estimate the pricing equation (4) to get ¯8. Don‘t forget that Ø^s  may be endogenous.

v.Basedon your estimate for ¯8, what is your opinion about the anti-trust authority‘s concern?

2. Select one merger case from the list below:  金融学经济学代写

• Staples & OfficeDepot
• Airlines
• Amazon & WholeFoods
• Volvo andScania
• Cerealindustry

Download the corresponding dataset from the course web page.

(a)First,describe the market structure of the industry during the relevant time period.

(b)Propose a merger.

(c)Conduct a mergersimulation:

i.Specifya demand model and estimate it using the given data set.

ii.Write down a system of first order conditions before the merger. What are marginalcosts?

iii.Writedown a system of first order conditions after the merger.

iv.Solvethe system of first order conditions to find a new equilibrium price vector.

v.Discuss your result.

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