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Cournot Competition, Forward Markets and Efficiency

Author

Listed:
  • Blaise Allaz

    (HEC Paris - Recherche - Hors Laboratoire - HEC Paris - Ecole des Hautes Etudes Commerciales)

  • Jean-Luc Vila

Abstract

We build a model with two Cournot duopolists who produce at Time 0 wich is the date at which all demand is realized. N periods before time 0, the duopolists trade on a forward market for delivery at Time 0. Having made these contracts, they trade again at time ( − N + 1) for delivery at Time 0. etc. We show that, in equilibrium, each of them will sell forward which makes them worse off and makes consumers better off than if the forward market did not exist. When N, the number of forward trading periods prior to production, tends to infinity, the outcome tends to the competitive solution.

Suggested Citation

  • Blaise Allaz & Jean-Luc Vila, 1993. "Cournot Competition, Forward Markets and Efficiency," Post-Print hal-00511806, HAL.
    • Handle: RePEc:hal:journl:hal-00511806
    DOI: 10.1006/jeth.1993.1001
    as

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    Keywords

    Cournot Competition;

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