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Elastic demand, sunk costs and the Kreps-Scheinkman extension of the Cournot model

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  • Paul Madden

    (School of Economic Studies, Manchester University, Manchester M13 9PL, UK)

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    Abstract

    The paper shows that, with any rationing mechanism between the efficient and proportional extremes, the Kreps-Scheinkman two-stage quantity-price game reduces to the Cournot model if demand is uniformly elastic and if all costs are sunk at the first stage, thus providing positive results to set against existing negative statements.

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    Bibliographic Info

    Article provided by Springer in its journal Economic Theory.

    Volume (Year): 12 (1998)
    Issue (Month): 1 ()
    Pages: 199-212

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    Handle: RePEc:spr:joecth:v:12:y:1998:i:1:p:199-212

    Note: Received: May 24, 1995; revised version: March 6, 1997
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    Web page: http://link.springer.de/link/service/journals/00199/index.htm

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    Cited by:
    1. Peter Neary & Joe Tharakan, 2011. "International Trade with Endogenous Mode of Competition in General Equilibrium," CREPP Working Papers 1111, Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège.
    2. Neary, J Peter & Tharakan, Joe, 2006. "Endogenous Mode of Competition in General Equilibrium," CEPR Discussion Papers 5943, C.E.P.R. Discussion Papers.
    3. Pedro Jara-Moroni, 2008. "The Cournot outcome as the result of price competition," Working Papers halshs-00587866, HAL.
    4. Nicolas Gruyer, 2009. "A note on quantity precommitment, cournot outcome and asymmetric capacity costs," Economics Bulletin, AccessEcon, vol. 29(1), pages 384-391.
    5. Wu, Xin-wang & Zhu, Quan-tao & Sun, Laixiang, 2012. "On equivalence between Cournot competition and the Kreps–Scheinkman game," International Journal of Industrial Organization, Elsevier, vol. 30(1), pages 116-125.

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