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Cost Manipulation Games in Oligopoly, with Costs of Manipulating

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  • Ngo Van Long
  • Antoine Soubeyran

Abstract

This paper analyzes a class of two-stage Cournot games where rival firms, in the first stage, incur real resource costs in jointly manipulating their marginal costs of production, so as to influence the outcome of game they want to play in the second stage. Marginal costs may be manipulated by various means, such as redistribution of productive assets, or choice of location, or by creating an internal market for inputs. A general formulation of the game is provided, and several applications of the model are analyzed. We show that often the optimal allocation of resources within a Cournot oligopoly can be asymmetric, even when firms are ex ante symmetric, and we characterize the degree of asymmetry by finding a global solution to a convex (or concave) program. Our formulation of cost manipulation games with cost of manipulating is general enough to apply to Bertrand games with differentiated products, games involving location and transport costs (the Hotelling and Salop models), and Stackelberg games. Ce papier étudie une classe de jeu de Cournot à deux étapes, où dans une première étape, des firmes rivales manipulent leurs coûts marginaux de production en supportant des coûts de manipulation, de manière à pouvoir choisir le type de jeu qu'elles veulent jouer en deuxième étape. Les coûts marginaux sont manipulés en redistribuant les actifs productifs, ou en choisissant leur localisation, ou en créant des marchés internes d'inputs. Une formulation générale de ce type de jeu, dit jeux de manipulation des coûts avec coût à manipuler, est fournie, et plusieurs applications du modèle sont analysées. Nous montrons que souvent l'allocation optimale des ressources au sein d'un oligopole à la Cournot peut être asymétrique, même dans le cas ou les firmes sont symétriques ex-ante. Nous caractérisons le degré d'asymétrie en fournissant la solution globale d'un programme convexe (ou concave). Notre approche est assez générale pour pouvoir être appliquée aux jeux de Bertrand avec produits différenciés, aux jeux de localisation avec coût de transport (les modèles de Hotelling et de Salop) et aux jeux de Stackelberg.

Suggested Citation

  • Ngo Van Long & Antoine Soubeyran, 1999. "Cost Manipulation Games in Oligopoly, with Costs of Manipulating," CIRANO Working Papers 99s-13, CIRANO.
  • Handle: RePEc:cir:cirwor:99s-13
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    References listed on IDEAS

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    More about this item

    Keywords

    Oligopoly; Cournot games; cost manipulation; Oligopole; jeux de Cournot; manipulation des coûts;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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