Cobb-Douglas preferences in bilateral oligopoly
Bilateral oligopoly is a simple model of exchange in which a finite set of sellers seek to exchange the goods they are endowed with for money with a finite set of buyers, and no price-taking assumptions are imposed. If trade takes place via a strategic market game bilateral oligopoly can be thought of as two linked proportional-sharing contests: in one the sellers share the aggregate bid from the buyers in proportion to their supply and in the other the buyers share the aggregate supply in proportion to their bids. The analysis can be separated into two â€˜partial gamesâ€™. First, fix the aggregate bid at B; in the first partial game the sellers contest this fixed prize in proportion to their supply and the aggregate supply in the equilibrium of this game is XËœ (B). Next, fix the aggregate supply at X; in the second partial game the buyers contest this fixed prize in proportion to their bids and the aggregate bid in the equilibrium of this game is ËœB (X). The analysis of these two partial games takes into account competition within each side of the market. Equilibrium in bilateral oligopoly must take into account competition between sellers and buyers and requires, for example, ËœB (XËœ (B)) = B. When all traders have Cobb-Douglas preferences Ëœ X(B) does not depend on B and ËœB (X) does not depend on X: whilst there is competition within each side of the market there is no strategic interdependence between the sides of the market. The Cobb-Douglas assumption provides a tractable framework in which to explore the features of fully strategic trade but it misses perhaps the most interesting feature of bilateral oligopoly, the implications of which are investigated.
|Date of creation:||Jun 2013|
|Date of revision:|
|Contact details of provider:|| Postal: Sir William Duncan Building, 130 Rottenrow, Glasgow G4 0GE|
Phone: +44 (0)141 548 3842
Fax: +44 (0)141 548 4445
Web page: http://www.strath.ac.uk/economics/
More information through EDIRC
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.:
- Alex Dickson, 2013. "The Effects of Entry in Bilateral Oligopoly," Games, MDPI, Open Access Journal, vol. 4(3), pages 283-303, June.
- Alex Dickson & Roger Hartley, 2013.
"Bilateral oligopoly and quantity competition,"
Springer, vol. 52(3), pages 979-1004, April.
- Alex Dickson & Roger Hartley, 2009. "Bilateral oligopoly and quantity competition," The School of Economics Discussion Paper Series 0911, Economics, The University of Manchester.
- Alex Dickson & Roger Hartley, 2009. "Bilateral oligopoly and quantity competition," Working Papers 0922, University of Strathclyde Business School, Department of Economics.
- Giulio Codognato & Ludovic A. Julien, 2013.
"Noncooperative Oligopoly in Markets with a Cobb-Douglas Continuum of Traders,"
Recherches économiques de Louvain,
De Boeck Université, vol. 79(4), pages 75-88.
- Giulio CODOGNATO & Ludovic A. JULIEN, 2013. "Noncooperative Oligopoly in Markets with a Cobb-Douglas Continuum of Traders," Discussion Papers (REL - Recherches Economiques de Louvain) 2013044, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Giraud, Gael, 2003. "Strategic market games: an introduction," Journal of Mathematical Economics, Elsevier, vol. 39(5-6), pages 355-375, July.
- Dickson, Alex & Hartley, Roger, 2008.
"The strategic Marshallian cross,"
Games and Economic Behavior,
Elsevier, vol. 64(2), pages 514-532, November.
- Alex Dickson & Roger Hartley, 2013. "On ‘Nice’ And ‘Very Nice’ Autarkic Equilibria In Strategic Market Games," Manchester School, University of Manchester, vol. 81(5), pages 745-762, 09.
- Perez-Castrillo, J David & Verdier, Thierry, 1992. " A General Analysis of Rent-Seeking Games," Public Choice, Springer, vol. 73(3), pages 335-50, April.
- Busetto, Francesca & Codognato, Giulio & Ghosal, Sayantan, 2008. "Cournot-Walras Equilibrium as a Subgame Perfect Equilibrium," The Warwick Economics Research Paper Series (TWERPS) 837, University of Warwick, Department of Economics.
- Busetto, Francesca & Codognato, Giulio, 2006. ""Very Nice" trivial equilibria in strategic market games," Journal of Economic Theory, Elsevier, vol. 131(1), pages 295-301, November.
- Richard Cornes & Roger Hartley, 2005.
"Asymmetric contests with general technologies,"
Springer, vol. 26(4), pages 923-946, November.
- Shapley, Lloyd S & Shubik, Martin, 1977. "Trade Using One Commodity as a Means of Payment," Journal of Political Economy, University of Chicago Press, vol. 85(5), pages 937-68, October.
When requesting a correction, please mention this item's handle: RePEc:str:wpaper:1306. 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: (Kirsty Hall)
If references are entirely missing, you can add them using this form.