The timing of consumer arrivals in Edgeworth's duopoly model
In his classic Papers relating to Political Economy (1897), Francis Edgeworth demonstrated that when duopolists have limited productive capacity, there may be no Nash equilibrium in prices. One feature of Edgeworth's model is that consumers are assumed to meet with the duopolists at the same time. ; This paper analyzes a version of the Edgeworth model in which consumers arrive sequentially instead of simultaneously. This departure from Edgeworth's framework should seem reasonable since there are few markets besides auctions in which buyers all meet with sellers at the same time. ; The point of the analysis is to show that when sellers engage in quantity constrained price competition, the timing of consumer arrivals may greatly affect the nature of equilibrium. It turns out that the existence of Nash equilibrium in prices may be restored. It also turns out that the duopolists may be able to maximize joint profits!
|Date of creation:||1988|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.federalreserve.gov/
More information through EDIRC
|Order Information:||Web: http://www.federalreserve.gov/pubs/ifdp/order.htm|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Richard E. Levitan & Martin Shubik, 1970.
"Price Duopoly and Capacity Constraints,"
Cowles Foundation Discussion Papers
287, Cowles Foundation for Research in Economics, Yale University.
- Peters, Michael, 1984. "Bertrand Equilibrium with Capacity Constraints and Restricted Mobility," Econometrica, Econometric Society, vol. 52(5), pages 1117-27, September.
- Grossman, Sanford J, 1981. "Nash Equilibrium and the Industrial Organization of Markets with Large Fixed Costs," Econometrica, Econometric Society, vol. 49(5), pages 1149-72, September.
- Brock, William A & Scheinkman, Jose A, 1985. "Price Setting Supergames with Capacity Constraints," Review of Economic Studies, Wiley Blackwell, vol. 52(3), pages 371-82, July.
When requesting a correction, please mention this item's handle: RePEc:fip:fedgif:328. 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: (Kris Vajs)
If references are entirely missing, you can add them using this form.