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Oligopolistic Competition as a Common Agency Game

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  • Claude, D’ASPREMONT
  • Rodolphe, DOS SANTOS FERREIRA

Abstract

In applying the common agency framework to the context of an oligopolistic industry, we want to go beyond the classical dichotomy between Cournot and Bertrand competition. We define two games, the oligopolistic game and the corresponding concept of oligopolistic equilibrium, and an associated auxiliary game that can be interpreted as a common agency game and that has the same set of equilibria. The parameterization of the set of (potential) equilibria in terms of competitive thoughness is derived from the first order conditions of the auxiliary game. The enforceability of monopolistic competition, of price and quantity competition, and of collusion is examined in this framework. We then describe the (reduced) set of equilibria one would obtain, first in the non-intrinsic case and then in the case where a global approach would be adopted instead of partial equilibrium approach. Finally, we illustrate the use of the concept of oligopolistic equilibrium and of the corresponding parameterization by referring to the standard case of symmetric quadratic utility.

Suggested Citation

  • Claude, D’ASPREMONT & Rodolphe, DOS SANTOS FERREIRA, 2005. "Oligopolistic Competition as a Common Agency Game," Discussion Papers (ECON - Département des Sciences Economiques) 2005018, Université catholique de Louvain, Département des Sciences Economiques.
  • Handle: RePEc:ctl:louvec:2005018
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    References listed on IDEAS

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    1. Claude d'Aspremont & Rodolphe Dos Santos Ferreira & Louis-André Gérard-Varet, 2007. "Competition For Market Share Or For Market Size: Oligopolistic Equilibria With Varying Competitive Toughness," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(3), pages 761-784, August.
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    Cited by:

    1. Ulrich Horst & Santiago Moreno-Bromberg, 2010. "Efficiency and Equilibria in Games of Optimal Derivative Design," SFB 649 Discussion Papers SFB649DP2010-035, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    2. Claude d’Aspremont & Rodolphe Dos Santos Ferreira, 2016. "Oligopolistic vs. monopolistic competition: Do intersectoral effects matter?," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 62(1), pages 299-324, June.
    3. d'Aspremont, Claude & Dos Santos Ferreira, Rodolphe, 2009. "Price-quantity competition with varying toughness," Games and Economic Behavior, Elsevier, vol. 65(1), pages 62-82, January.
    4. Han, Seungjin, 2012. "On take it or leave it offers in common agency," Economics Letters, Elsevier, vol. 117(3), pages 777-781.
    5. Andrea Attar & Eloisa Campioni & Gwenael Piaser, 2011. "Information Revelation in Competing Mechanism Games," CEIS Research Paper 205, Tor Vergata University, CEIS, revised 04 Jul 2011.
    6. Attar, Andrea & Campioni, Eloisa & Piaser, Gwenaël, 2013. "Two-sided communication in competing mechanism games," Journal of Mathematical Economics, Elsevier, vol. 49(1), pages 62-70.
    7. repec:eee:reecon:v:71:y:2017:i:4:p:729-739 is not listed on IDEAS
    8. Saul DESIDERIO & Davide DOTTORI, 2007. "A note on competitive toughness: why it should be identified neither with product substitutability, nor (inversely) with concentration. Toward a unified theory of oligopoly," Working Papers 301, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    9. d’Aspremont, Claude & Dos Santos Ferreira, Rodolphe, 2017. "The Dixit–Stiglitz economy with a ‘small group’ of firms: A simple and robust equilibrium markup formula," Research in Economics, Elsevier, vol. 71(4), pages 729-739.

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