IDEAS home Printed from https://ideas.repec.org/a/zag/zirebs/v9y2006i2p1-11.html
   My bibliography  Save this article

Capacity Constraints and Investment Decisions under Cournot Competition

Author

Listed:
  • Claudia Halabí

    (Escuela de Ingenia Comercial, Universidad Santo Tomas, Santiago, Chile)

  • David R. Kamerschen

    (University of Georgia, USA)

Abstract

This paper analyses how the equilibrium is affected when adding investment decisions and capacity constraints to the traditional Cournot duopoly model. Authors investigate a multiperiod setting with two firms taking investment decisions in every period. We prove that under these circumstances the Cournot equilibrium is unstable and the tendency is to a cartel structure in the industry. However, this behavior is not necessarily cooperative or subject to a tacit agreement. It is optimising for the duopolists to cut down the amount produced in spite of the behavior of the other firm until they reach the monopoly equilibrium.

Suggested Citation

  • Claudia Halabí & David R. Kamerschen, 2006. "Capacity Constraints and Investment Decisions under Cournot Competition," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 9(2), pages 1-11, November.
  • Handle: RePEc:zag:zirebs:v:9:y:2006:i:2:p:1-11
    as

    Download full text from publisher

    File URL: http://www.efzg.hr/default.aspx?id=6178
    Download Restriction: Abstract only available on-line

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    cartel; Cournot; capacity; duopoly; investment;

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zag:zirebs:v:9:y:2006:i:2:p:1-11. 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: (Jurica Šimurina). General contact details of provider: http://edirc.repec.org/data/fefzghr.html .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.