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On a property of mixed strategy equilibria of the pricing game

Author

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  • Massimo A. De Francesco

    (Department of Economics, University of Siena)

Abstract

Before solving a two-stage capacity and pricing game for oligopoly, Boccard and Wauthy (2000) argue that, as under duopoly, at a mixed strategy equilibrium of the pricing game the largest firm's expected profit is the profit accruing to it as a Stackelberg follower when the rivals supply their entire capacity. We point to a serious mistake in their argument and then we see how this important property can be satisfactorily established.

Suggested Citation

  • Massimo A. De Francesco, 2003. "On a property of mixed strategy equilibria of the pricing game," Economics Bulletin, AccessEcon, vol. 4(30), pages 1-8.
    • Handle: RePEc:ebl:ecbull:eb-03d40005
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    References listed on IDEAS

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    1. Boccard, Nicolas & Wauthy, Xavier, 2000. "Bertrand competition and Cournot outcomes: further results," Economics Letters, Elsevier, vol. 68(3), pages 279-285, September.
    2. Partha Dasgupta & Eric Maskin, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, I: Theory," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(1), pages 1-26.
    3. Levitan, Richard & Shubik, Martin, 1972. "Price Duopoly and Capacity Constraints," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(1), pages 111-122, February.
    4. William A. Brock & José A. Scheinkman, 1985. "Price Setting Supergames with Capacity Constraints," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(3), pages 371-382.
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    Cited by:

    1. Boccard, Nicolas & Wauthy, Xavier, 2004. "Bertrand competition and Cournot outcomes: a correction," Economics Letters, Elsevier, vol. 84(2), pages 163-166, August.
    2. Simon Loertscher, 2008. "Market Making Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 56(2), pages 263-289, June.
    3. De Francesco, Massimo A. & Salvadori, Neri, 2008. "Bertrand-Edgeworth games under oligopoly with a complete characterization for the triopoly," MPRA Paper 10767, University Library of Munich, Germany, revised 26 Sep 2008.
    4. Gebhardt, Georg, 2018. "Measuring the competitive impact of the internet: Evidence from a natural experiment in broadband access," International Journal of Industrial Organization, Elsevier, vol. 57(C), pages 84-113.
    5. Hirata, Daisuke, 2008. "Bertrand-Edgeworth Equilibrium in Oligopoly," MPRA Paper 7946, University Library of Munich, Germany.
    6. Massimo A. De Francesco, 2006. "Endogenous entry under Bertrand-Edgeworth and Cournot competition with capacity indivisibility," Department of Economics University of Siena 480, Department of Economics, University of Siena.

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    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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