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PhD candidates on Job Market, 2018

 
Ke LIU
   
  (CV)   (Personal site)


Job Market Paper

Dynamic diminishing marginal utility and tacit collusion

Abstract: Diminishing marginal utility is usually treated as a static property in economics, while in many situations it is more appropriately modeled as a dynamic issue. This paper investigates how dynamic diminishing marginal utility influences firms' ability to tacitly collude, and shows that it crucially depends on whether diminishing marginal utility is product-specific or market-wide. When diminishing marginal utility is product-specific, i.e., when a consumer's consumption of one product this period only lowers her marginal utilities of a subset of products next period, collusion is easier to sustain since consumers can switch among firms to avoid utility loss on the equilibrium path, while at least some consumers cannot switch when a firm deviates to capture all consumers. When diminishing marginal utility is market-wide, i.e., when a consumer's consumption of one product this period lowers her marginal utilities of all products next period, collusion is harder to sustain due to endogenous demand fluctuations.

 

Research Interests

Industrial Organization; Dynamic Games; Applied Microeconomic Theory

 

 

 

                    [MSc program]                               [Department of Economics]