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- Title
A DYNAMIC THEORY OF INTERFIRM BEHAVIOR.
- Authors
Williamson, Oliver E.
- Abstract
This article presents a study which examined the factors responsible for generating a particular class of oligopoly behavior. The factor that appears to be mainly responsible for shifting the firms in an oligopoly between cooperative and conflict solutions is the condition of the environment. The proposed model in the study attempts to merge the principal social and economic factors that appear to be responsible for an important class of oligopoly behavior into a system of simultaneous equations within which these influences work themselves out. Since the phenomenon of alternation between competitive and cooperative solutions that provided the original stimulus for the analysis involves a process of dynamic adjustment, the proposed model was formulated as a system of differential equations. In addition, the dynamic model lent itself to a variety of extensions. First, a self-recovery mechanism was built in. Second, the influence of industry structure was investigated. It was shown that the social and economic influences of structural variables could be traced through the model with comparative ease. Finally, the effects of regulatory constraints were investigated. The dynamic model displayed further versatility by revealing what types of conditions are necessary for enforcement to be effective.
- Subjects
OLIGOPOLIES; SOCIAL factors; INDUSTRIAL organization (Economic theory); COMPETITION; ECONOMICS
- Publication
Quarterly Journal of Economics, 1965, Vol 79, Issue 4, p579
- ISSN
0033-5533
- Publication type
Article
- DOI
10.2307/1880653