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A Competitive Duopoly where Information Spillovers can be Mutually Advantageous

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  • Thierry Lafay

Abstract

This paper studies the production strategies of firms in a duopoly market of homogenous products characterized by quantity competition. Demand is partially unknown and firms are free to produce once, whenever they want before the existence of demand. We show that the nature of the equilibrium in such a game depends on the importance of the information spillovers between a leader and a follower. A Pareto-optimal sequential entry may happen. Therefore, the existence of information spillovers can be sufficient to bypass the leader's rent dissipation result in a duopoly quantity competition framework.
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Suggested Citation

  • Thierry Lafay, 2011. "A Competitive Duopoly where Information Spillovers can be Mutually Advantageous," Recherches économiques de Louvain, De Boeck Université, vol. 77(1), pages 79-100.
    • Handle: RePEc:cai:reldbu:rel_771_0079
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    References listed on IDEAS

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    1. Christophe Caron & Thierry Lafay, 2008. "How Risk Disciplines Pre-Commitment," Theory and Decision, Springer, vol. 65(3), pages 205-226, November.
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    More about this item

    Keywords

    Cournot; Stackelberg; preemption; information spillovers;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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