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Oligopolistic competition as a common agency game

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Author Info
DÕASPREMONT, Claude
DOS SANTOS FERREIRA, Rodolphe

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Abstract

In applying the common agency framework to the context of an oligopolistic industry, we want to go beyond the classical dichotomy between Cournot and Bertrand competition. We define two games, the oligopolistic game and the corresponding concept of oligopolistic equilibrium, and an associated auxiliary game that can be interpreted as a common agency game and that has the same set of equilibria. The parameterization of the set of (potential) equilibria in terms of competitive toughness is derived from the first order conditions of this auxiliary game. The enforceability of monopolistic competition, of price and quantity competition, and of collusion is examined in this framework. We then describe the (reduced) set of equilibria one would obtain, first in the nonintrinsic case and then in the case where a global approach would be adopted instead of partial equilibrium approach. Finally, we illustrate the use of the concept of oligopolistic equilibrium and of the corresponding parameterization by referring to the standard case of symmetric quadratic utility.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2005018.

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Date of creation: 01 Feb 2005
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Handle: RePEc:cor:louvco:2005018

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  1. Bernheim, B Douglas & Whinston, Michael D, 1986. "Common Agency," Econometrica, Econometric Society, vol. 54(4), pages 923-42, July. [Downloadable!] (restricted)
  2. Carl Davidson & Raymond Deneckere, 1986. "Long-Run Competition in Capacity, Short-Run Competition in Price, and the Cournot Model," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 404-415, Autumn. [Downloadable!] (restricted)
  3. Hugo Sonnenschein, 1968. "The Dual of Duopoly Is Complementary Monopoly: or, Two of Cournot's Theories Are One," Journal of Political Economy, University of Chicago Press, vol. 76, pages 316. [Downloadable!] (restricted)
  4. Claudio Mezzetti, 1997. "Common Agency with Horizontally Differentiated Principals," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 323-345, Summer. [Downloadable!] (restricted)
  5. Grether, David M & Plott, Charles R, 1984. "The Effects of Market Practices in Oligopolistic Markets: An Experimental Examination of the Ethyl Case," Economic Inquiry, Oxford University Press, vol. 22(4), pages 479-507, October.
  6. Doyle, Christopher, 1988. "Different selling strategies in Bertrand oligopoly," Economics Letters, Elsevier, vol. 28(4), pages 387-390. [Downloadable!] (restricted)
  7. repec:bep:theadv:v:3:y:2003:i:1:p:1037-1037 is not listed on IDEAS
  8. Peters, Michael, 2001. "Common Agency and the Revelation Principle," Econometrica, Econometric Society, vol. 69(5), pages 1349-72, September.
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  9. David Martimort & Lars Stole, 2002. "The Revelation and Delegation Principles in Common Agency Games," Econometrica, Econometric Society, vol. 70(4), pages 1659-1673, July. [Downloadable!] (restricted)
  10. Ehud Kalai & Mark A. Satterthwaite, 1986. "The Kinked Demand Curve," Discussion Papers 677, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  11. David Martimort, 1996. "Exclusive Dealing, Common Agency, and Multiprincipals Incentive Theory," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 1-19, Spring. [Downloadable!] (restricted)
  12. Charles A. Holt & David T. Scheffman, 1987. "Facilitating Practices: The Effects of Advance Notice and Best-Price Policies," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 187-197, Summer. [Downloadable!] (restricted)
  13. Laussel, Didier & Le Breton, Michel, 2001. "Conflict and Cooperation: The Structure of Equilibrium Payoffs in Common Agency," Journal of Economic Theory, Elsevier, vol. 100(1), pages 93-128, September. [Downloadable!] (restricted)
  14. Martimort, David, 1994. "Exclusive Dealing, Common Agency and Multiprincipals Incentive Theory," IDEI Working Papers 43, Institut d'Économie Industrielle (IDEI), Toulouse, revised 1996.
  15. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn. [Downloadable!] (restricted)
  16. Martimort, David & Stole, Lars, 1999. "Contractual Externalities and Common Agency Equilibria," IDEI Working Papers 110, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2003. [Downloadable!]
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