Dynamic duopoly with congestion effects
We analyze duopolistic competition between horizontally differentiated firms selling durable goods or services subject to congestion. At each point of time, new customers buy one unit of the commodity from one of the firms, by comparing present prices and future congestion rates. We study the linear Markov equilibrium of this game which exists and is unique when firms are not too different. The existence of negative consumption externalities is shown to soften the price competition. Moreover, we show that the firm with the larger capacity has, at the steady state, a larger market share, a higher price, and a lower congestion rate. The price of an entrant decreases gradually after entry, while the price of the incumbent rises. The speed of convergence to the steady state is faster, the stronger is the congestion effect. On étudie la concurrence entre deux firmes qui vendent des biens ou des services durables sous la condition d'encombrement. À chaque instant, des clients nouveaux achètent une unité du bien, en comparant les prix et les taux d'encombrement futur. On caractérise l'équilibre markovien de ce jeu. L'existence des externalités négatives rend la concurrence moins féroce. On montre que la firme qui a la plus grande capacité a, dans l'état stationnaire, une plus grande part de marché, un prix plus élevé, et un taux d'encombrement plus faible. Le prix du bien d'une nouvelle firme diminue continuellement, tandis que celui de son rival en exercise monte. La vitesse de convergence est une fonction croissante de l'effet d'encombrement.
(This abstract was borrowed from another version of this item.)
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.:
- Karp, Larry, 1996.
"Depreciation erodes the Coase Conjecture,"
European Economic Review,
Elsevier, vol. 40(2), pages 473-490, February.
- Karp, L., 1992. "Depreciation erodes the coase conjecture," Discussion Paper Series In Economics And Econometrics 9210, Economics Division, School of Social Sciences, University of Southampton.
- Karp, Larry, 1995. "Depreciation Erodes the Coase Conjecture," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt1fs6j5nn, Department of Agricultural & Resource Economics, UC Berkeley.
- Scotchmer, Suzanne, 1985. "Profit-maximizing clubs," Journal of Public Economics, Elsevier, vol. 27(1), pages 25-45, June.
- Grilo, Isabel & Shy, Oz & Thisse, Jacques-Francois, 2001.
"Price competition when consumer behavior is characterized by conformity or vanity,"
Journal of Public Economics,
Elsevier, vol. 80(3), pages 385-408, June.
- GRILO, Isabel & SHY, Oz & THISSE, Jacques-François, . "Price competition when consumer behavior is characterized by conformity or vanity," CORE Discussion Papers RP -1518, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- GRILO, Isabel & SHY, Oz & THISSE, Jacques-François, 1997. "Price competition when consumer behavior is characterized by conformity or vanity," CORE Discussion Papers 1997032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- repec:cup:cbooks:9780521331586 is not listed on IDEAS
- repec:cup:cbooks:9780521337465 is not listed on IDEAS
- d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979.
"On Hotelling's "Stability in Competition","
Econometric Society, vol. 47(5), pages 1145-50, September.
- Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, June.
- Toker Doganoglu, 2000. "Dynamic Price Competition with Persistent Consumer Tastes," Econometric Society World Congress 2000 Contributed Papers 1442, Econometric Society.
- repec:cup:cbooks:9780521637329 is not listed on IDEAS
- Driskill, Robert, 2001. "Durable goods oligopoly," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 391-413, March.
When requesting a correction, please mention this item's handle: RePEc:eee:indorg:v:22:y:2004:i:5:p:655-677. 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: (Zhang, Lei)
If references are entirely missing, you can add them using this form.