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Strategic Inventories in Two-period Oligopoly

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Author Info

  • Mollgaard, H.P.
  • Poddar, S.
  • Sasaki, D.

Abstract

A general model of two-period duopoly is set up to show how inventories can serve a strategic purpose, enabling the firm to commit to raise its latter-period output. The strategic effect of inventories depends on the convexity of the cost function, on the cost of storage, and on the slopes of each firm's individual supply schedules. Our analysis encompasses general up-sloping supply schedules, with horizontal Bertrand supply schedules and vertical Cournot supply schedules as the two polar cases, via one continuous parameter which has a straightforward one-to-one correspondence with what has been broadly known as the conjectural variation parameter. A closed form of the strategic inventories is then established for a parametrised two-period n-firm linear oligopoly, which can be treated as a user-friendly package for empirical estimation as well as for regulatory policy making.

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Bibliographic Info

Paper provided by Exeter University, Department of Economics in its series Discussion Papers with number 0017.

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Length: 22 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:exe:wpaper:0017

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Postal: Streatham Court, Rennes Drive, Exeter EX4 4PU
Phone: (01392) 263218
Fax: (01392) 263242
Web page: http://business-school.exeter.ac.uk/about/departments/economics/
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Related research

Keywords: SUPPLY ; STOCKS ; STRATEGIC PLANNING;

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Cited by:
  1. Breton, Michèle & Kharbach, Mohammed, 2008. "The welfare effects of unbundling gas storage and distribution," Energy Economics, Elsevier, vol. 30(3), pages 732-747, May.
  2. Pınar Keskinocak & Kasarin Chivatxaranukul & Paul M. Griffin, 2008. "Strategic inventory in capacitated supply chain procurement," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 29(1), pages 23-36.
  3. Jean-Paul Chavas, 2008. "On Storage Behavior Under Imperfect Competition, with Application to the American Cheese Market," Review of Industrial Organization, Springer, vol. 33(4), pages 325-339, December.

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