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Differentiated-products Cournot attributes higher markups than Bertrand–Nash

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  • Magnolfi, Lorenzo
  • Quint, Daniel
  • Sullivan, Christopher
  • Waldfogel, Sarah

Abstract

In a differentiated products setting when costs are unobserved, the Cournot model of quantity-setting competition attributes a greater share of prices to markups than does the Bertrand–Nash model of price-setting, leading to lower estimates of marginal costs.

Suggested Citation

  • Magnolfi, Lorenzo & Quint, Daniel & Sullivan, Christopher & Waldfogel, Sarah, 2022. "Differentiated-products Cournot attributes higher markups than Bertrand–Nash," Economics Letters, Elsevier, vol. 219(C).
    • Handle: RePEc:eee:ecolet:v:219:y:2022:i:c:s0165176522002944
    DOI: 10.1016/j.econlet.2022.110804
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    References listed on IDEAS

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    1. Hathaway, Neville J. & Rickard, John A., 1979. "Equilibria of price-setting and quantity-setting duopolies," Economics Letters, Elsevier, vol. 3(2), pages 133-137.
    2. Okuguchi, Koji, 1987. "Equilibrium prices in the Bertrand and Cournot oligopolies," Journal of Economic Theory, Elsevier, vol. 42(1), pages 128-139, June.
    3. Amir, Rabah & Jin, Jim Y., 2001. "Cournot and Bertrand equilibria compared: substitutability, complementarity and concavity," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 303-317, March.
    4. Leonard Cheng, 1985. "Comparing Bertrand and Cournot Equilibria: A Geometric Approach," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 146-152, Spring.
    5. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
    6. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    7. Vives, Xavier, 1985. "On the efficiency of Bertrand and Cournot equilibria with product differentation," Journal of Economic Theory, Elsevier, vol. 36(1), pages 166-175, June.
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    Cited by:

    1. Sesmero, Juan Pablo & Balagtas, Joseph V. & Wu, Steven Y. & Albert Scott, Francisco, 2023. "Out-of-Equilibrium Behavior and Inference on Firm Conduct Evidence from Laboratory Experiments," 2023 Annual Meeting, July 23-25, Washington D.C. 335854, Agricultural and Applied Economics Association.

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    More about this item

    Keywords

    Cournot competition; Bertrand competition; Markups;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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