On the Optimal Number of Firms in the Commons: Cournot vs Bertrand
AbstractWe revisit the debate on the optimal number of firms in the commons in a differential oligopoly game in which firms are either quantity- or price-setting agents. Production exploits a natural resource and involves a negative externality. We calculate the number of firms maximising industry profits, finding that it is larger in the Cournot case. While industry structure is always inefficient under Bertrand behaviour, it may or may not be so under Cournot behaviour, depending on parameter values. The comparison of private industry optima reveals that the Cournot steady state welfare level exceeds the corresponding Bertrand magnitude if the weight of the stock of pollution is large enough.
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Bibliographic InfoPaper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number wp856.
Date of creation: Dec 2012
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Find related papers by JEL classification:
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
- Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-22 (All new papers)
- NEP-COM-2012-12-22 (Industrial Competition)
- NEP-ENV-2012-12-22 (Environmental Economics)
- NEP-IND-2012-12-22 (Industrial Organization)
- NEP-REG-2012-12-22 (Regulation)
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