Judo Economics in Markets with Multiple Firms
We study a sequential Bertrand game with one dominant market incumbent and multiple small entrants selling homogeneous products. Whilst the equilibrium for the case of a single entrant is well-known from Gelman and Salop (1983), we derive properties of the N-firm equilibrium and present an algorithm that can be used to calculate this equilibrium. Using this algorithm we derive the exact equilibrium for the cases of two and three small entrants. For more than three entrants only approximate results are possible. We use numerical results to gain further understanding of the equilibrium for an increasing number of firms and in particular for the case where N diverges to infinity. Similarly to the two-firm Judo equilibrium, we see that a capacity limitation for the small rms is necessary to achieve positive profits.
|Date of creation:||Jul 2013|
|Contact details of provider:|| Postal: Universitätsplatz 2, Gebäude W und I, 39106 Magdeburg|
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- Federico Etro, 2008.
"Stackelberg Competition with Endogenous Entry,"
Royal Economic Society, vol. 118(532), pages 1670-1697, October.
- Cracau, Daniel, 2013.
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Elsevier, vol. 119(1), pages 35-37.
- Dan Kovenock & Raymond Deneckere & Tom Faith & Beth Allen, 2000.
"Capacity precommitment as a barrier to entry: A Bertrand-Edgeworth approach,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 15(3), pages 501-530.
- Beth Allen & Raymond Deneckere & Tom Faith & Dan Kovenock, 1995. "Capacity precommitment as a barrier to entry: a Bertrand-Edgeworth approach," Staff Report 187, Federal Reserve Bank of Minneapolis.
- Beth Allen & Raymond Deneckere & Tom Faith & Dan Kovenock, 1994. "Capacity Precommitment as a Barrier to Entry:A Bertrand-Edgeworth Approach," Industrial Organization 9411002, EconWPA, revised 14 Nov 1994.
- Allen, B. & Deneckere, R. & Faith, T. & Kovenock, D., 1994. "Capacity Precommitment as a Barrier to Entry: A Bertrand-Edgeworth Approach," Purdue University Economics Working Papers 1062, Purdue University, Department of Economics.
- Allen, B. & Deneckere, R. & Faith, T. & Kovenock, D., 1994. "Capacity Precommitment as a Barrier to Entry: A Bertrand- Engeworth Approach," Papers 9483, Tilburg - Center for Economic Research.
- Federico Etro, 2006. "Aggressive leaders," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 146-154, 03.
- Anderson, Simon P. & Engers, Maxim, 1992. "Stackelberg versus Cournot oligopoly equilibrium," International Journal of Industrial Organization, Elsevier, vol. 10(1), pages 127-135, March.
- B. Curtis Eaton & Roger Ware, 1987. "A Theory of Market Structure with Sequential Entry," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 1-16, Spring.
- Abdolkarim Sadrieh & Daniel Cracau, 2013. "Coexistence of small and dominant firms in Bertrand competition: Judo economics in the lab," FEMM Working Papers 130001, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
- Boyer, Marcel & Moreaux, Michel, 1986. "Perfect competition as the limit of a hierarchical market game," Economics Letters, Elsevier, vol. 22(2-3), pages 115-118.
- Furth, D. & Kovenock, D., 1990.
"Price Leadership In A Duopoly With Capacity Constraints And Product Differentiation,"
Purdue University Economics Working Papers
992, Purdue University, Department of Economics.
- Dave Furth & Dan Kovenock, 1993. "Price leadership in a duopoly with capacity constraints and product differentiation," Journal of Economics, Springer, vol. 57(1), pages 1-35, February.
- Ludovic Julien & Olivier Musy & Aurélien Saïdi, 2012.
"On hierarchical competition in oligopoly,"
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Springer, vol. 107(3), pages 217-237, November.
- Sorgard, Lars, 1997.
"Judo economics reconsidered: Capacity limitation, entry and collusion,"
International Journal of Industrial Organization,
Elsevier, vol. 15(3), pages 349-368, May.
- Sorgard, L., 1995. "Judo Economics Reconsidered: Capacity Limitation, Entry and Collusion," Papers 18/95, Norwegian School of Economics and Business Administration-.
- repec:rje:randje:v:37:y:2006:1:p:146-154 is not listed on IDEAS
- Judith R. Gelman & Steven C. Salop, 1983. "Judo Economics: Capacity Limitation and Coupon Competition," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 315-325, Autumn.
- Vives, Xavier, 1988. "Sequential entry, industry structure and welfare," European Economic Review, Elsevier, vol. 32(8), pages 1671-1687, October.
- Robson, Arthur J, 1990. "Stackelberg and Marshall," American Economic Review, American Economic Association, vol. 80(1), pages 69-82, March.
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