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Price-quantity competition with varying toughness

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  • d'Aspremont, Claude
  • Dos Santos Ferreira, Rodolphe

Abstract

For an industry producing a single homogeneous good, we define and characterize the concept of oligopolistic equilibrium, allowing for a parameterized continuum of regimes with varying competitive toughness. This parameterization will appear to be equivalent to the one used in the empirical literature. The Cournot and the competitive outcomes coincide, respectively, with the softest and the toughest oligopolistic equilibrium outcome. The concept offers an alternative to the conjectural variations approach with better foundations. It can be viewed as a canonical description of oligopolistic behavior which can receive different theoretical justifications and provide a convenient tool for modeling purposes. Two illustrative cases (linear and isoelastic demands) are developed and the possibility of endogenizing (strategically) the choice of competitive toughness by the firms is examined.

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  • d'Aspremont, Claude & Dos Santos Ferreira, Rodolphe, 2009. "Price-quantity competition with varying toughness," Games and Economic Behavior, Elsevier, vol. 65(1), pages 62-82, January.
  • Handle: RePEc:eee:gamebe:v:65:y:2009:i:1:p:62-82
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    Cited by:

    1. Claude d’Aspremont & Rodolphe Dos Santos Ferreira, 2009. "Household behavior and individual autonomy," Working Papers of BETA 2009-17, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    2. Camille Cornand & Rodolphe Dos Santos Ferreira, 2015. "Playing the game the others want to play: Keynes’ beauty contest revisited," Working Papers of BETA 2015-01, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    3. Claude d’Aspremont & Rodolphe Dos Santos Ferreira & Jacques Thépot, 2007. "Hawks and doves in segmented markets : A formal approach to competitive aggressiveness," Working Papers of LaRGE Research Center 2007-04, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    4. Rodolphe Dos Santos Ferreira, 2021. "When Muth’s entrepreneurs meet Schrödinger’s cat," Revue d'économie politique, Dalloz, vol. 131(3), pages 449-459.
    5. Cornand, Camille & Dos Santos Ferreira, Rodolphe, 2020. "Cooperation in a differentiated duopoly when information is dispersed: A beauty contest game with endogenous concern for coordination," Mathematical Social Sciences, Elsevier, vol. 106(C), pages 101-111.
    6. Cherchye, Laurens & Demuynck, Thomas & De Rock, Bram, 2013. "The empirical content of Cournot competition," Journal of Economic Theory, Elsevier, vol. 148(4), pages 1552-1581.
    7. d'Aspremont, Claude & Dos Santos Ferreira, Rodolphe, 2010. "Oligopolistic competition as a common agency game," Games and Economic Behavior, Elsevier, vol. 70(1), pages 21-33, September.
    8. Claude d’Aspremont & Rodolphe Dos Santos Ferreira, 2014. "Household behavior and individual autonomy: an extended Lindahl mechanism," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 55(3), pages 643-664, April.
    9. Rodolphe Dos Santos Ferreira & Teresa Lloyd-Braga & Leonor Modesto, 2016. "Could competition always raise the risk of bank failure?," Working Papers of BETA 2016-27, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    10. Farm, Ante, 2013. "Price Formation in Consumer Markets," Working Paper Series 1/2013, Stockholm University, Swedish Institute for Social Research.
    11. Jacques Thépot, 2021. "Pricing algorithms in oligopoly with decreasing returns," Theory and Decision, Springer, vol. 91(4), pages 493-515, November.
    12. Escrihuela-Villar Marc, 2016. "On Merger Profitability and the Intensity of Rivalry," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(2), pages 1203-1212, April.

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