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Comparing Cournot Duopoly And Monopoly With Asymmetric Differentiated Goods

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  • CHANG, MING CHUNG
  • LIN, YUN-CHIEH
  • LIN, CHIU FEN
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    Abstract

    This study compares a differentiated Cournot duopoly with a two-product monopoly by using the socially optimal solution as a reference point. Each solution is allowedto be either an interior or a corner solution. We establish that the ranking regarding each individual price is clear-cut and normal. In contrast, every one of the rankings regarding individual outputs and industry output can go either way. More importantly, the duopoly may be less welfare-efficient than the monopoly. For example, when demands are linear, lower welfare is achieved if the asymmetry between firms is strong enough. One reason is that when firms are asymmetric, the output structure in the duopoly is distorted with probability one, whereas the output structure in the monopoly is generally socially optimal.

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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/25380/1/HJeco0530217700.pdf
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    Bibliographic Info

    Article provided by Hitotsubashi University in its journal Hitotsubashi Journal of Economics.

    Volume (Year): 53 (2012)
    Issue (Month): 2 (December)
    Pages: 177-200

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    Handle: RePEc:hit:hitjec:v:53:y:2012:i:2:p:177-200

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    Related research

    Keywords: Cournot duopoly; multi-product monopoly; output structure; horizontal merger; antitrust policy;

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    References

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    1. Hugo Sonnenschein, 1968. "The Dual of Duopoly Is Complementary Monopoly: or, Two of Cournot's Theories Are One," Journal of Political Economy, University of Chicago Press, vol. 76, pages 316.
    2. Ming Chung Chang & Hsiao-Ping Peng, 2012. "Cournot And Bertrand Equilibria Compared: A Critical Review And An Extension From The Output-Structure Viewpoint," The Japanese Economic Review, Japanese Economic Association, vol. 63(4), pages 467-496, December.
    3. Oleksiy Andriychenko & Audrius Girnius & Atanu Saha, 2006. "Complementary Goods: Prices and Consumer Welfare Under Duopoly and Monopoly," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 13(3), pages 373-386.
    4. Symeonidis, George, 2003. "Comparing Cournot and Bertrand equilibria in a differentiated duopoly with product R&D," International Journal of Industrial Organization, Elsevier, vol. 21(1), pages 39-55, January.
    5. Piercarlo Zanchettin, 2006. "Differentiated Duopoly with Asymmetric Costs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(4), pages 999-1015, December.
    6. Hur, Jung, 2006. "Preferential Tariff Policy, Product Quality and Welfare," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 47(2), pages 197-217, December.
    7. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    8. Ming Chang, 2010. "An Asymmetric Oligopolist can Improve Welfare by Raising Price," Review of Industrial Organization, Springer, vol. 36(1), pages 75-96, February.
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