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Cost Manipulation Games in Oligopoly, with Costs of Manipulating

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Author Info
Ngo Van Long ()
Antoine Soubeyran

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Abstract

This paper analyzes a class of two-stage Cournot games where rival firms, in the first stage, incur real resource costs in jointly manipulating their marginal costs of production, so as to influence the outcome of game they want to play in the second stage. Marginal costs may be manipulated by various means, such as redistribution of productive assets, or choice of location, or by creating an internal market for inputs. A general formulation of the game is provided, and several applications of the model are analyzed. We show that often the optimal allocation of resources within a Cournot oligopoly can be asymmetric, even when firms are ex ante symmetric, and we characterize the degree of asymmetry by finding a global solution to a convex (or concave) program. Our formulation of cost manipulation games with cost of manipulating is general enough to apply to Bertrand games with differentiated products, games involving location and transport costs (the Hotelling and Salop models), and Stackelberg games.

Ce papier étudie une classe de jeu de Cournot à deux étapes, où dans une première étape, des firmes rivales manipulent leurs coûts marginaux de production en supportant des coûts de manipulation, de manière à pouvoir choisir le type de jeu qu'elles veulent jouer en deuxième étape. Les coûts marginaux sont manipulés en redistribuant les actifs productifs, ou en choisissant leur localisation, ou en créant des marchés internes d'inputs. Une formulation générale de ce type de jeu, dit jeux de manipulation des coûts avec coût à manipuler, est fournie, et plusieurs applications du modèle sont analysées. Nous montrons que souvent l'allocation optimale des ressources au sein d'un oligopole à la Cournot peut être asymétrique, même dans le cas ou les firmes sont symétriques ex-ante. Nous caractérisons le degré d'asymétrie en fournissant la solution globale d'un programme convexe (ou concave). Notre approche est assez générale pour pouvoir être appliquée aux jeux de Bertrand avec produits différenciés, aux jeux de localisation avec coût de transport (les modèles de Hotelling et de Salop) et aux jeux de Stackelberg.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 99s-13.

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Date of creation: 01 Mar 1999
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Handle: RePEc:cir:cirwor:99s-13

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Related research
Keywords: Oligopoly; Cournot games; cost manipulation; Oligopole; jeux de Cournot; manipulation des coûts;

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Find related papers by JEL classification:
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Hennessy, David A. & Lapan, Harvey E., 2006. "Harmonic symmetries of imperfect competition on circular city," Staff General Research Papers 12551, Iowa State University, Department of Economics. [Downloadable!]
    Other versions:
  2. Rabah Amir & Filomena Garcia & Malgorzata Knauff, 2006. "Endogenous Heterogeneity in Strategic Models: Symmetry-breaking via Strategic Substitutes and Nonconcavities," Working Papers 2006/29, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
    Other versions:
  3. Ngo Van Long & Antoine Soubeyran, 2001. "Emission Taxes and Standards for an Asymmetric Oligopoly," CIRANO Working Papers 2001s-07, CIRANO. [Downloadable!]
  4. Lapan, Harvey E. & Hennessy, David A., 2004. "Cost Arrangement and Welfare in a Multi-Product Cournot Oligopoly," Staff General Research Papers 12207, Iowa State University, Department of Economics. [Downloadable!]
  5. Ngo Van Long & Antoine Soubeyran, 2003. "Favoritism in Vertical Relationship: Input Prices and Access Quality," CIRANO Working Papers 2003s-14, CIRANO. [Downloadable!]
  6. Ngo Van Long & Antoine Soubeyran, 1999. "Input Price Discrimination, Access Pricing, and Bypass," CIRANO Working Papers 99s-23, CIRANO. [Downloadable!]
  7. Sami Dakhlia & Flavio M. Menezes & Akram Temimi, 2004. "The role of R&D technology in asymmetric research joint ventures," Cahiers de la Maison des Sciences Economiques b04054, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
    Other versions:
  8. Temimi, Akram & Dakhlia, Sami & Menezes, Flavio Marques, 2001. "Duplication of R D and Industry Concentration," Economics Working Papers (Ensaios Economicos da EPGE) 437, Graduate School of Economics, Getulio Vargas Foundation (Brazil). [Downloadable!]
  9. Hennessy, David A. & Lapan, Harvey E., 2008. "Buying Ecological Services: Nature’s Harmonies, Fragmented Reserves and the Agricultural Extensification Debate," Staff General Research Papers 13005, Iowa State University, Department of Economics. [Downloadable!]
    Other versions:
  10. Valletti, Tommaso, 2002. "Input Price Discrimination with Downstream Cournot Competitors," CEPR Discussion Papers 3570, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  11. Ngo Van Long & Antoine Soubeyran, 2003. "A Theory of Favoritism under International Oligopoly," CIRANO Working Papers 2003s-15, CIRANO. [Downloadable!]
  12. AMIR, Rabah & NANNERUP, Niels, 2004. "Asymmetric regulation of identical polluters in oligopoly models," CORE Discussion Papers 2004046, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
    Other versions:
  13. Arye Hillman & Ngo Van Long & Antoine Soubeyran, 2000. "Protection, Lobbying, and Market Structure," CIRANO Working Papers 2000s-12, CIRANO. [Downloadable!]
    Other versions:
  14. SOUBEYRAN, Antoine & WEBER, Shlomo, 2001. "District formation: a co-opetition approach," CORE Discussion Papers 2001016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  15. Antonio, TESORIERE, 2007. "Allocating cost reducing investments over competing divisions," Discussion Papers (ECON - Département des Sciences Economiques) 2007021, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
  16. Joan Canton, 2007. "Environmental Taxation and International Eco-Industries," Working Papers 2007.26, Fondazione Eni Enrico Mattei. [Downloadable!]
  17. AMIR, Rabah & EVSTIGNEEV, Igor & WOODERS, John, 2001. "Noncooperative versus cooperative R&D with endogenous spillover rates," CORE Discussion Papers 2001050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
    Other versions:
  18. Ngo Van Long & Antoine Soubeyran, 1999. "Existence and Uniqueness of Cournot Equilibrium: A Contraction Mapping Approach," CIRANO Working Papers 99s-22, CIRANO. [Downloadable!]
    Other versions:
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