Cournot duopoly when the competitors operate multiple production plants
This article considers a Cournot duopoly under an isoelastic demand function and cost functions with built-in capacity limits. The special feature is that each firm is assumed to operate multiple plants, which can be run alone or in combination. Each firm has two plants with different capacity limits, so each has three cost options, the third being to run both plants, dividing the load according to the principle of equal marginal costs. As a consequence, the marginal cost functions come in three disjoint pieces, so the reaction functions, derived on basis of global profit maximization, may also consist of disjoint pieces. This is reflected in a particular bifurcation structure, due to border-collision bifurcations and to particular basin boundaries, related to the discontinuities. It is shown that stable cycles may coexist, and the non-existence of unstable cycles constitutes a new property. We also compare the coexistent short periodic solutions in terms of the resulting real profits.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- al-Nowaihi, A. & Levine, P. L., 1985. "The stability of the cournot oligopoly model: A reassessment," Journal of Economic Theory, Elsevier, vol. 35(2), pages 307-321, August.
- Nabih Agiza, Hamdy & Italo Bischi, Gian & Kopel, Michael, 1999. "Multistability in a dynamic Cournot game with three oligopolists," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 51(1), pages 63-90.
- Puu, Tonu & Gardini, Laura & Sushko, Irina, 2005. "A Hicksian multiplier-accelerator model with floor determined by capital stock," Journal of Economic Behavior & Organization, Elsevier, vol. 56(3), pages 331-348, March.
- Furth, Dave, 1986. "Stability and instability in oligopoly," Journal of Economic Theory, Elsevier, vol. 40(2), pages 197-228, December.
- Bonanno, Giacomo, 1988. "Oligopoly Equilibria When Firms Have Local Knowledge of Demand," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(1), pages 45-55, February.
- Hommes, Cars H. & Nusse, Helena E. & Simonovits, Andras, 1995. "Cycles and chaos in a socialist economy," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 155-179.
- Hommes, Cars H., 1995. "A reconsideration of Hicks' non-linear trade cycle model," Structural Change and Economic Dynamics, Elsevier, vol. 6(4), pages 435-459, December.
- Gallegati, M. & Gardini, L. & Puu, T. & Sushko, I., 2003. "Hicks’ trade cycle revisited: cycles and bifurcations," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 63(6), pages 505-527.
- Dana, Rose-Anne & Montrucchio, Luigi, 1986. "Dynamic complexity in duopoly games," Journal of Economic Theory, Elsevier, vol. 40(1), pages 40-56, October.
- R. D. Theocharis, 1960. "On the Stability of the Cournot Solution on the Oligopoly Problem," Review of Economic Studies, Oxford University Press, vol. 27(2), pages 133-134.
- Bischi, Gian Italo & Kopel, Michael, 2001. "Equilibrium selection in a nonlinear duopoly game with adaptive expectations," Journal of Economic Behavior & Organization, Elsevier, vol. 46(1), pages 73-100, September.
When requesting a correction, please mention this item's handle: RePEc:eee:dyncon:v:33:y:2009:i:1:p:250-265. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.