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Cournot–Bertrand comparison in a mixed oligopoly

Author

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  • Junichi Haraguchi

    () (The University of Tokyo)

  • Toshihiro Matsumura

    () (The University of Tokyo)

Abstract

Abstract We revisit the classic discussion comparing price and quantity competition, but in a mixed oligopoly in which one state-owned public firm competes against private firms. It has been shown that in a mixed duopoly, price competition yields a larger profit for the private firm. This implies that firms face weaker competition under price competition, which contrasts sharply with the case of a private oligopoly. Here, we adopt a standard differentiated oligopoly with a linear demand. We find that regardless of the number of firms, price competition yields higher welfare. However, the profit ranking depends on the number of private firms. We find that if the number of private firms is greater than or equal to five, it is possible that quantity competition yields a larger profit for each private firm. We also endogenize the price-quantity choice. Here, we find that Bertrand competition can fail to be an equilibrium, unless there is only one private firm.

Suggested Citation

  • Junichi Haraguchi & Toshihiro Matsumura, 2016. "Cournot–Bertrand comparison in a mixed oligopoly," Journal of Economics, Springer, vol. 117(2), pages 117-136, March.
  • Handle: RePEc:kap:jeczfn:v:117:y:2016:i:2:d:10.1007_s00712-015-0452-6
    DOI: 10.1007/s00712-015-0452-6
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Lee, Sang-Ho & Matsumura, Toshihiro & Sato, Susumu, 2017. "A New Approach to Free Entry Markets in Mixed Oligopolies: Welfare Implications," MPRA Paper 76450, University Library of Munich, Germany.
    2. Carlos, Gutiérrez-Hita & Vicente-Pérez, José, 2018. "On Supply Function Equilibria in a Mixed Duopoly," QM&ET Working Papers 18-1, University of Alicante, D. Quantitative Methods and Economic Theory.
    3. repec:kap:jeczfn:v:123:y:2018:i:1:d:10.1007_s00712-017-0559-z is not listed on IDEAS
    4. Juan Carlos Bárcena-Ruiz & María Begoña Garzón, 2017. "Privatization of state holding corporations," Journal of Economics, Springer, vol. 120(2), pages 171-188, March.
    5. Cho, Sumi & Lee, Sang-Ho, 2017. "Endogenous Private Leadership under Subsidy Policy on the Social Enterprises," MPRA Paper 83431, University Library of Munich, Germany.
    6. Duan, Lian, 2017. "Optimal degree of privatization in a mixed oligopoly with multiple public enterprises," MPRA Paper 82896, University Library of Munich, Germany.
    7. Toshihiro Matsumura & Akira Ogawa, 2016. "Corporate social responsibility and endogenous competition structure," Economics Bulletin, AccessEcon, vol. 36(4), pages 2117-2127.
    8. repec:eee:reveco:v:56:y:2018:i:c:p:363-370 is not listed on IDEAS
    9. repec:kap:jeczfn:v:124:y:2018:i:1:d:10.1007_s00712-017-0560-6 is not listed on IDEAS
    10. Haraguchi, Junichi & Hirose, Kosuke, 2018. "Endogenous Timing in a Price-Setting Mixed Oligopoly," MPRA Paper 87285, University Library of Munich, Germany.
    11. Gutiérrez-Hita, Carlos & Vicente-Pérez, José, 2018. "On supply function competition in a mixed oligopoly," MPRA Paper 83792, University Library of Munich, Germany.
    12. Sato, Susumu & Matsumura, Toshihiro, 2017. "Dynamic privatization policy," MPRA Paper 79849, University Library of Munich, Germany.
    13. Hirose, Kosuke & Matsumura, Toshihiro, 2017. "Comparing Welfare and Profit in Quantity and Price Competition within Stackelberg Mixed Duopolies," MPRA Paper 77700, University Library of Munich, Germany.
    14. Luciano Fanti & Marcella Scrimitore, 2017. "How to compete? Cournot vs. Bertrand in a vertical structure with an integrated input supplier," Discussion Papers 2017/221, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    15. repec:eee:japwor:v:46:y:2018:i:c:p:1-8 is not listed on IDEAS
    16. repec:kap:jeczfn:v:124:y:2018:i:1:d:10.1007_s00712-017-0561-5 is not listed on IDEAS
    17. João Correia-da-Silva & Joana Pinho, 2018. "Collusion in mixed oligopolies and the coordinated effects of privatization," Journal of Economics, Springer, vol. 124(1), pages 19-55, May.
    18. Haraguchi, Junichi & Matsumura, Toshihiro, 2018. "Government-leading welfare-improving collusion," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 363-370.
    19. repec:eee:ecolet:v:168:y:2018:i:c:p:6-9 is not listed on IDEAS
    20. Kim, Seung-Leul & Lee, Sang-Ho & Matsumura, Toshihiro, 2017. "Corporate social responsibility and privatization policy in a mixed oligopoly," MPRA Paper 79780, University Library of Munich, Germany.
    21. Mitra, Manipushpak & Pal, Rupayan & Paul, Arindam & Sharada, P.M., 2017. "Equilibrium co-existence of public and private firms and the plausibility of price competition," MPRA Paper 81802, University Library of Munich, Germany.
    22. Haraguchi, Junichi & Matsumura, Toshihiro & Yoshida, Shohei, 2018. "Competitive pressure from neighboring markets and optimal privatization policy," Japan and the World Economy, Elsevier, vol. 46(C), pages 1-8.
    23. repec:spr:epolit:v:34:y:2017:i:2:d:10.1007_s40888-017-0065-3 is not listed on IDEAS
    24. Sato, Susumu & Matsumura, Toshihiro, 2017. "Shadow Cost of Public Funds and Privatization Policies," MPRA Paper 81054, University Library of Munich, Germany.
    25. Haraguchi, Junichi & Matsumura, Toshihiro, 2017. "Optimal Privatization Policy with Asymmetry among Private Firms," MPRA Paper 77523, University Library of Munich, Germany.

    More about this item

    Keywords

    Cournot; Bertrand; Mixed markets; Differentiated products; Oligopoly;

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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