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Generalized Quantity Competition for Multiple Products and Loss of Efficiency

Author

Listed:
  • Jonathan Kluberg

    (Operations Research Center, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139)

  • Georgia Perakis

    (Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139)

Abstract

We study a generalized model of quantity (Cournot) oligopolistic competition. The impact of competition on social surplus and firms' profit is analyzed. Firms produce multiple differentiated products and face production constraints. We compare the social surplus produced by competing firms and by colluding firms with the maximum achievable total surplus in the market. Similarly, we quantify the loss of profit that firms incur by competing instead of colluding. Our goal is to understand how the presence of competition affects the firms and society as a whole, but also to determine what are the key drivers of the inefficiencies that arise due to competition.

Suggested Citation

  • Jonathan Kluberg & Georgia Perakis, 2012. "Generalized Quantity Competition for Multiple Products and Loss of Efficiency," Operations Research, INFORMS, vol. 60(2), pages 335-350, April.
    • Handle: RePEc:inm:oropre:v:60:y:2012:i:2:p:335-350
    DOI: 10.1287/opre.1110.1017
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    References listed on IDEAS

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    Cited by:

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    2. Georgia Perakis & Wei Sun, 2014. "Efficiency Analysis of Cournot Competition in Service Industries with Congestion," Management Science, INFORMS, vol. 60(11), pages 2684-2700, November.
    3. Randall Berry & Michael Honig & Thành Nguyen & Vijay Subramanian & Rakesh Vohra, 2020. "The Value of Sharing Intermittent Spectrum," Management Science, INFORMS, vol. 66(11), pages 5242-5264, November.
    4. Choné, Philippe & Linnemer, Laurent, 2020. "Linear demand systems for differentiated goods: Overview and user’s guide," International Journal of Industrial Organization, Elsevier, vol. 73(C).
    5. Amr Farahat & Woonghee Tim Huh & Hongmin Li, 2019. "On the Relationship Between Quantity Precommitment and Cournot Games," Operations Research, INFORMS, vol. 67(1), pages 109-122, January.
    6. Tsitsiklis, John N. & Xu, Yunjian, 2014. "Efficiency loss in a Cournot oligopoly with convex market demand," Journal of Mathematical Economics, Elsevier, vol. 53(C), pages 46-58.
    7. Chakraborty, Abhishek & Mandal, Prasenjit, 2021. "Channel efficiency and retailer tier dominance in a supply chain with a common manufacturer," European Journal of Operational Research, Elsevier, vol. 294(1), pages 100-121.
    8. Philippe Choné & Laurent Linnemer, 2019. "The quasilinear quadratic utility model: an overview," CESifo Working Paper Series 7640, CESifo.
    9. Maria C. Jansen & Osman Y. Özaltın, 2017. "Note on Cournot Competition Under Yield Uncertainty," Manufacturing & Service Operations Management, INFORMS, vol. 19(2), pages 305-308, May.
    10. Bazhanov, Andrei & Levin, Yuri & Nediak, Mikhail, 2015. "Quantity Competition in the Presence of Strategic Consumers," MPRA Paper 62075, University Library of Munich, Germany.

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