Title: Quantity precommitment and Bertrand competition yield Cournot outcomes
Abstract:Bertrand's model of oligopoly, which gives perfectly competitive outcomes, assumes that: (1) there is competition over prices and (2) production follows the realization of demand. We show that both of...Bertrand's model of oligopoly, which gives perfectly competitive outcomes, assumes that: (1) there is competition over prices and (2) production follows the realization of demand. We show that both of these assumptions are required. More precisely, consider a two-stage oligopoly game where, first, there is simultaneous production, and, second, after production levels are made public, there is price competition. Under mild assumptions about demand, the unique equilibrium outcome is the Cournot outcome. This illustrates that solutions to oligopoly games depend on both the strategic variables employed and the context (game form) in which those variables are employed.Read More
Publication Year: 1989
Publication Date: 1989-01-27
Language: en
Type: book-chapter
Indexed In: ['crossref']
Access and Citation
Cited By Count: 1617
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