Advanced Search
MyIDEAS: Login

Price Competition vs. Quantity Competition: The Role of Uncertainty

Contents:

Author Info

  • Paul Klemperer
  • Margaret Meyer

Abstract

We analyze the Nash eqilibria of a one-stage game in which the nature of the strategic variables (prices or quantities) is determined endogenously. Duopolists producing differentiated products simultaneously choose either a quantity to produce or a price to charge. In the absence of exogenous uncertainty, there exist four types of equilibria with differing levels of output: (price, price), (quantity, quantity), (price, quantity), and (quantity, price). The multiplicity of equilibria stems from each firm's indifference between setting price and quantity, given its conjecture about its rival's strategy. But exogenous uncertainty about market demands, which makes firms uncertain about their residual demands, even in equilibrium, gives firms strict preferences between setting price and quantity. As a result, the number of equilibria is reduced. When uncertainty is exogenous, we analyze the effect of the slope of marginal costs, the nature of the demand disturbance, and the curvature of demand on firms' propensities to complete with price or quantity as the strategic variable. These three factors are likely to influence the nature and intensity of oligopolistic competition.

Download Info

If 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.
File URL: http://links.jstor.org/sici?sici=0741-6261%28198624%2917%3A4%3C618%3APCVQCT%3E2.0.CO%3B2-1&origin=repec
File Function: full text
Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

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 Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 17 (1986)
Issue (Month): 4 (Winter)
Pages: 618-638

as in new window
Handle: RePEc:rje:randje:v:17:y:1986:i:winter:p:618-638

Contact details of provider:
Web page: http://www.rje.org

Order Information:
Web: https://editorialexpress.com/cgi-bin/rje_online.cgi

Related research

Keywords:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Ricardo Reis, 2005. "Inattentive Producers," NBER Working Papers 11820, National Bureau of Economic Research, Inc.
  2. Giampiero Giacomello & Luca Lambertini, 2013. "Defensive Weapons and Star Wars: A Supergame with Optimal Punishments," Working Paper Series 57_13, The Rimini Centre for Economic Analysis.
  3. Paul Klemperer, 2009. "A New Auction for Substitutes: Central-Bank Liquidity Auctions, “Toxic Asset” Auctions, and Variable Product-Mix Auctions," Economics Papers 2009-W06, Economics Group, Nuffield College, University of Oxford.
  4. Philippe Bacchetta & Eric van Wincoop, 2002. "A Theory of the Currency Denomination of International Trade," NBER Working Papers 9039, National Bureau of Economic Research, Inc.
  5. Klemperer, Paul, 2009. "The Product-Mix Auction: A New Auction Design for Differentiated Goods," Working paper 591, Regulation2point0.
  6. Eric Rasmusen & Young-Ro Yoon, 2007. "First versus Second-Mover Advantage with Information Asymmetry about the Size of New Markets," Caepr Working Papers 2007-017, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  7. Orlando I. Balboa & Andrew F. Daughety & Jennifer F. Reinganum, 2001. "Market Structure and the Demand for Free Trade," Vanderbilt University Department of Economics Working Papers 0112, Vanderbilt University Department of Economics, revised Dec 2002.
  8. Majid Motamedi & Shahram Moeeni & Salman Gharakhani & Iman Keyfarokhi, 2014. "The Behavior of Iranian Restructured Electricity Market in Supply Function Equilibrium Framework," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(1), pages 178-191, January.
  9. Bacchetta, Philippe & van Wincoop, Eric, 2002. "A Theory of Currency Denomination of International Trade," CEPR Discussion Papers 3120, C.E.P.R. Discussion Papers.
  10. Wang, Shinn-Shyr & Stiegert, Kyle W., 2006. "The Duopolistic Firm with Endogenous Risk Control: Case of Persuasive Advertising and Product Differentiation," Staff Paper Series 496, University of Wisconsin, Agricultural and Applied Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:rje:randje:v:17:y:1986:i:winter:p:618-638. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.