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Oligopoly in Segmented Markets

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  • Shmuel Ben-Zvi
  • Elhanan Helpman

Abstract

We propose a new solution concept for a game among oligopolists that simultaneously compete in several segmented markets. The motivation for this solution comes from international trade, but it also has applications in other areas. It is based on a three-stage extension of the two-stage Kreps-Scheinkman game. We show that two-way trade is not an equilibrium outcome and that there exist bounds on possible cross-market priced differentials that are defined by transport costs. Prices are the same when transport costs are zero. In fact, in the limiting case of zero transport costs the equilibrium coincides with a Cournot equilibrium in a single integrated market. In the presence of transport coats there nay exist multiple equilibria.

Suggested Citation

  • Shmuel Ben-Zvi & Elhanan Helpman, 1988. "Oligopoly in Segmented Markets," NBER Working Papers 2665, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:2665
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    References listed on IDEAS

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    1. Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, vol. 11(1), pages 1-14, February.
    2. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
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    Cited by:

    1. Villena, Marcelo J. & Araneda, Axel A., 2017. "Dynamics and stability in retail competition," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 134(C), pages 37-53.
    2. Harry Flam, 1992. "Product Markets and 1992: Full Integration, Large Gains?," Journal of Economic Perspectives, American Economic Association, vol. 6(4), pages 7-30, Fall.
    3. Quint, Ansgar F. & Rudsinske, Jonas F., 2020. "Asymmetric general oligopolistic equilibrium," University of Göttingen Working Papers in Economics 405, University of Goettingen, Department of Economics.
    4. Helpman, Elhanan, 1989. "The Non-Competitive Theory of International Trade and Trade Policy," Foerder Institute for Economic Research Working Papers 275468, Tel-Aviv University > Foerder Institute for Economic Research.
    5. Fishelson, Gideon, 1989. "Allocation of a Product Between Two Markets, Under Uncertainty," Foerder Institute for Economic Research Working Papers 275473, Tel-Aviv University > Foerder Institute for Economic Research.

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