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On the Optimal Number of Firms in the Commons: Cournot vs Bertrand

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Listed:
  • D. Dragone
  • L. Lambertini
  • A. Palestini
  • A. Tampieri

Abstract

We revisit the debate on the optimal number of firms in the commons in a differential oligopoly game in which firms are either quantity- or price-setting agents. Production exploits a natural resource and involves a negative externality. We calculate the number of firms maximising industry profits, finding that it is larger in the Cournot case. While industry structure is always inefficient under Bertrand behaviour, it may or may not be so under Cournot behaviour, depending on parameter values. The comparison of private industry optima reveals that the Cournot steady state welfare level exceeds the corresponding Bertrand magnitude if the weight of the stock of pollution is large enough.

Suggested Citation

  • D. Dragone & L. Lambertini & A. Palestini & A. Tampieri, 2012. "On the Optimal Number of Firms in the Commons: Cournot vs Bertrand," Working Papers wp856, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:wp856
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    Cited by:

    1. L. Lambertini, 2014. "On the Interplay between Resource Extraction and Polluting Emissions in Oligopoly," Working Papers wp976, Dipartimento Scienze Economiche, Universita' di Bologna.
    2. Luca Grilli & Michele Bisceglia, 2017. "A Duopoly with Common Renewable Resource and Incentives," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 19(04), pages 1-20, December.
    3. Luca Grilli & Michele Bisceglia, 2017. "A differential game in a duopoly with instantaneous incentives," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 40(1), pages 317-333, November.

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    More about this item

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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