Dynamic duopoly with congestion effects
AbstractWe analyze duopolistic competition between horizontally differentiated firms selling durable goods or services subject to congestion. At each point of time, new customers buy one unit of the commodity from one of the firms, by comparing present prices and future congestion rates. We study the linear Markov equilibrium of this game which exists and is unique when firms are not too different. The existence of negative consumption externalities is shown to soften the price competition. Moreover, we show that the firm with the larger capacity has, at the steady state, a larger market share, a higher price, and a lower congestion rate. The price of an entrant decreases gradually after entry, while the price of the incumbent rises. The speed of convergence to the steady state is faster, the stronger is the congestion effect. On Ã©tudie la concurrence entre deux firmes qui vendent des biens ou des services durables sous la condition d'encombrement. Ã chaque instant, des clients nouveaux achÃ¨tent une unitÃ© du bien, en comparant les prix et les taux d'encombrement futur. On caractÃ©rise l'Ã©quilibre markovien de ce jeu. L'existence des externalitÃ©s nÃ©gatives rend la concurrence moins fÃ©roce. On montre que la firme qui a la plus grande capacitÃ© a, dans l'Ã©tat stationnaire, une plus grande part de marchÃ©, un prix plus Ã©levÃ©, et un taux d'encombrement plus faible. Le prix du bien d'une nouvelle firme diminue continuellement, tandis que celui de son rival en exercise monte. La vitesse de convergence est une fonction croissante de l'effet d'encombrement.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Industrial Organization.
Volume (Year): 22 (2004)
Issue (Month): 5 (May)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505551
Other versions of this item:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Financing, Investment, and Capacity
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- L5 - Industrial Organization - - Regulation and Industrial Policy
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979.
"On Hotelling's "Stability in Competition","
Econometric Society, vol. 47(5), pages 1145-50, September.
- Grilo, Isabel & Shy, Oz & Thisse, Jacques-Francois, 2001.
"Price competition when consumer behavior is characterized by conformity or vanity,"
Journal of Public Economics,
Elsevier, vol. 80(3), pages 385-408, June.
- GRILO, Isabel & SHY, Oz & THISSE, Jacques-François, 1997. "Price competition when consumer behavior is characterized by conformity or vanity," CORE Discussion Papers 1997032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Dockner,Engelbert J. & Jorgensen,Steffen & Long,Ngo Van & Sorger,Gerhard, 2000. "Differential Games in Economics and Management Science," Cambridge Books, Cambridge University Press, number 9780521637329, November.
- Karp, L., 1992.
"Depreciation erodes the coase conjecture,"
Discussion Paper Series In Economics And Econometrics
9210, Economics Division, School of Social Sciences, University of Southampton.
- Karp, Larry, 1995. "Depreciation Erodes the Coase Conjecture," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt1fs6j5nn, Department of Agricultural & Resource Economics, UC Berkeley.
- Driskill, Robert, 2001. "Durable goods oligopoly," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 391-413, March.
- Toker Doganoglu, 2000. "Dynamic Price Competition with Persistent Consumer Tastes," Econometric Society World Congress 2000 Contributed Papers 1442, Econometric Society.
- Léonard,Daniel & Long,Ngo van, 1992.
"Optimal Control Theory and Static Optimization in Economics,"
Cambridge University Press, number 9780521331586, November.
- Léonard,Daniel & Long,Ngo van, 1992. "Optimal Control Theory and Static Optimization in Economics," Cambridge Books, Cambridge University Press, number 9780521337465, November.
- Scotchmer, Suzanne, 1985. "Profit-maximizing clubs," Journal of Public Economics, Elsevier, vol. 27(1), pages 25-45, June.
- Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, June.
- Brekke, Kurt R. & Cellini, Roberto & Siciliani, Luigi & Straume, Odd Rune, 2010. "Competition and quality in health care markets: A differential-game approach," Journal of Health Economics, Elsevier, vol. 29(4), pages 508-523, July.
- Matsumura, Toshihiro & Matsushima, Noriaki, 2007. "Congestion-reducing investments and economic welfare in a Hotelling model," Economics Letters, Elsevier, vol. 96(2), pages 161-167, August.
- Griva, Krina & Vettas, Nikolaos, 2011. "Price competition in a differentiated products duopoly under network effects," Information Economics and Policy, Elsevier, vol. 23(1), pages 85-97, March.
- Steffen Jørgensen & Georges Zaccour, 2007. "Developments in differential game theory and numerical methods: economic and management applications," Computational Management Science, Springer, vol. 4(2), pages 159-181, April.
- Kurt R. Brekke & Roberto Cellini & Luigi Siciliani & Odd Rune Straume, 2010.
"Competition and Quality in Regulated Markets with Sluggish Demand,"
CESifo Working Paper Series
2922, CESifo Group Munich.
- Brekke, Kurt Richard & Cellini, Roberto & Siciliani, Luigi & Straume, Odd Rune, 2008. "Competition and quality in regulated markets with sluggish demand," CEPR Discussion Papers 6938, C.E.P.R. Discussion Papers.
- Hilli, Amal & Laussel, Didier & Van Long, Ngo, 2013. "Large shareholders, monitoring, and ownership dynamics: Toward pure managerial firms?," Journal of Economic Dynamics and Control, Elsevier, vol. 37(3), pages 666-679.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wendy Shamier).
If references are entirely missing, you can add them using this form.