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Quantity versus Price in a Homogeneous Product Duopoly

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  • Dastidar, Krishnendu Ghosh

Abstract

In a simple homogeneous product setting, the paper looks at the debate on whether firms should choose quantity or price as their strategic variable. It examines a two-stage game between firms with symmetric costs in which the firms choose the strategic mode of operation in the first period and then, in the second period, price or output are chosen simultaneously according to the mode chosen in the first stage. In this game, it is possible to have two Nash equilibria where either both play in quantities or both play in prices. One firm choosing price and the other quantity can never be a Nash equilibrium in the two-stage game. Both choosing quantity is always a Nash equilibrium. Both choosing prices may be a Nash equilibrium only in some situations: the structure of the cost functions decides this issue. Copyright 1996 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research

Suggested Citation

  • Dastidar, Krishnendu Ghosh, 1996. "Quantity versus Price in a Homogeneous Product Duopoly," Bulletin of Economic Research, Wiley Blackwell, vol. 48(1), pages 83-91, January.
    • Handle: RePEc:bla:buecrs:v:48:y:1996:i:1:p:83-91
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    Cited by:

    1. Manasakis, Constantine & Vlassis, Minas, 2014. "Downstream mode of competition with upstream market power," Research in Economics, Elsevier, vol. 68(1), pages 84-93.
    2. Amarjyoti Mahanta, 2019. "Endogenous strategic variable in a mixed duopoly," Journal of Economics, Springer, vol. 128(1), pages 47-65, September.

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