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Cournot, Bertrand or Chamberlin: Toward a reconciliation

Author

Listed:
  • Parenti, Mathieu
  • Sidorov, Alexander
  • Thisse, Jacques-Francois
  • Zhelobodko, Evgeny

Abstract

The purpose of this paper is to provide a comparison of three types of competition in a differentiated industry: Cournot, Bertrand, and monopolistic competition. This is accomplished in an economy involving one sector and a population of consumers endowed with separable preferences and a given number of labor units. When firms are free to enter the market, monopolistically competitive firms charge lower prices than oligopolistic firms, while the mass of varieties provided by the market is smaller under the former than the latter. If the economy is sufficiently large, Cournot, Bertrand and Chamberlin solutions converge toward the same market outcome, which may be a competitive or a monopolistically competitive equilibrium, depending on the nature of preferences

Suggested Citation

  • Parenti, Mathieu & Sidorov, Alexander & Thisse, Jacques-Francois & Zhelobodko, Evgeny, 2015. "Cournot, Bertrand or Chamberlin: Toward a reconciliation," MPRA Paper 69640, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:69640
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    References listed on IDEAS

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    1. Jaskold Gabszewicz, Jean & Vial, Jean-Philippe, 1972. "Oligopoly "A la cournot" in a general equilibrium analysis," Journal of Economic Theory, Elsevier, vol. 4(3), pages 381-400, June.
    2. Evgeny Zhelobodko & Sergey Kokovin & Mathieu Parenti & Jacques‐François Thisse, 2012. "Monopolistic Competition: Beyond the Constant Elasticity of Substitution," Econometrica, Econometric Society, vol. 80(6), pages 2765-2784, November.
    3. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
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    6. Evgeny Zhelobodko & Sergey Kokovin & Mathieu Parenti & Jacques-François Thisse, 2011. "Monopolistic competition in general equilibrium: Beyond the CES," PSE Working Papers halshs-00566431, HAL.
    7. Roberts, John & Sonnenschein, Hugo, 1977. "On the Foundations of the Theory of Monopolistic Competition," Econometrica, Econometric Society, vol. 45(1), pages 101-113, January.
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    9. Behrens, Kristian & Murata, Yasusada, 2007. "General equilibrium models of monopolistic competition: A new approach," Journal of Economic Theory, Elsevier, vol. 136(1), pages 776-787, September.
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    11. Joan Robinson, 1934. "What is Perfect Competition?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 49(1), pages 104-120.
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    Cited by:

    1. 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.
    2. Commendatore, Pasquale & Kubin, Ingrid & Sushko, Iryna, 2022. "Big or small? A new economic geography model with an endogenous switch in the market structure," Chaos, Solitons & Fractals, Elsevier, vol. 161(C).
    3. Niroth Chhy, 2018. "A Simple Extension to the Dixit-Stiglitz Framework to Allow for Strategic Interaction," Economics Bulletin, AccessEcon, vol. 38(2), pages 1187-1197.
    4. Kenji Fujiwara, 2022. "Cournot, Bertrand or Chamberlin: Market Structures and the Home Market Effect," Discussion Paper Series 235, School of Economics, Kwansei Gakuin University.
    5. Ribeiro, Andre F., 2021. "Competition, Diversity and Quality," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 568(C).
    6. Marie-Laure Cabon-Dhersin & Nicolas Drouhin, 2020. "Soft-Capacity constrained price competition with entry and a minimum firm size: Chamberlin without differentiation," Working Papers hal-02909801, HAL.
    7. Burak Dindaroglu, 2023. "Product design in monopolistic competition," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(3), pages 471-488, September.
    8. Fujiwara, Kenji, 2023. "Market structure and industry location in a footloose capital model," Research in Economics, Elsevier, vol. 77(2), pages 275-283.

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    More about this item

    Keywords

    Cournot competition; Bertrand competition; monopolistic competition; free entry;
    All these keywords.

    JEL classification:

    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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