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On the Strategic Importance of Prices versus Quantities

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  • James W. Friedman

Abstract

In this article I investigate three single-shot models of differentiated-products oligopoly. In each model firms choose both output and price. The demand, cost, and spillover demand specifications are quite general, and there are three main results. First, with simultaneous choice there is no pure-strategy noncooperative equilibrium. Second, with output chosen first and announced to all firms before the choice of price, equilibrium sometimes exists, and when it does, it is the same as in a quantity-only model. Third, with price chosen and announced first, equilibrium always exists and is the same as in a price-only model.

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  • James W. Friedman, 1988. "On the Strategic Importance of Prices versus Quantities," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 607-622, Winter.
    • Handle: RePEc:rje:randje:v:19:y:1988:i:winter:p:607-622
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