IDEAS home Printed from https://ideas.repec.org/p/tse/wpaper/24803.html
   My bibliography  Save this paper

Inventories and Endogenous Stackelberg Leadership in Two-period Cournot Oligopoly

Author

Listed:
  • Mitraille, Sébastien
  • Moreaux, Michel

Abstract

Two-period Cournot competition between n identical firms producing at constant marginal cost and able to store before selling has pure strategy Nash- perfect equilibria, in which some firms store to exert endogenously a leader- ship over rivals. The number of firms storing balances market share gains, obtained by accumulating early the output, with losses in margin resulting from increased competition and higher operation costs. This number and the industry inventories are non monotonic in n. Concentration (HHI) and competition increase due to the strategic use of inventories.

Suggested Citation

  • Mitraille, Sébastien & Moreaux, Michel, 2011. "Inventories and Endogenous Stackelberg Leadership in Two-period Cournot Oligopoly," TSE Working Papers 11-249, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:24803
    as

    Download full text from publisher

    File URL: http://idei.fr/sites/default/files/medias/doc/wp/2011/mm_sm_072011.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Saloner, Garth, 1987. "Cournot duopoly with two production periods," Journal of Economic Theory, Elsevier, vol. 42(1), pages 183-187, June.
    2. Kirman, Alan P & Sobel, Matthew J, 1974. "Dynamic Oligopoly with Inventories," Econometrica, Econometric Society, vol. 42(2), pages 279-287, March.
    3. Henry Thille & Margaret E. Slade, 2000. "Forward trading and adjustment costs in Cournot markets," Cahiers d'Économie Politique, Programme National Persée, vol. 37(1), pages 177-195.
    4. Robson, Arthur J, 1990. "Stackelberg and Marshall," American Economic Review, American Economic Association, vol. 80(1), pages 69-82, March.
    5. Ware, Roger, 1984. "Sunk Costs and Strategic Commitment: A Proposed Three-Stage Equilibrium," Economic Journal, Royal Economic Society, vol. 94(374), pages 370-378, June.
    6. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March.
    7. Mahenc, P. & Salanie, F., 2004. "Softening competition through forward trading," Journal of Economic Theory, Elsevier, vol. 116(2), pages 282-293, June.
    8. Arvan, Lanny & Moses, Leon N, 1982. "Inventory Investment and the Theory of the Firm," American Economic Review, American Economic Association, vol. 72(1), pages 186-193, March.
    9. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(2), pages 185-199.
    10. Boyer, Marcel & Moreaux, Michel, 1985. "L’équilibre concurrentiel comme limite de suites d’équilibres stratégiques de Stackelberg," L'Actualité Economique, Société Canadienne de Science Economique, vol. 61(3), pages 299-315, septembre.
    11. Blanchard, Olivier J, 1983. "The Production and Inventory Behavior of the American Automobile Industry," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 365-400, June.
    12. Spulber, Daniel F, 1981. "Capacity, Output, and Sequential Entry," American Economic Review, American Economic Association, vol. 71(3), pages 503-514, June.
    13. Thille, Henry, 2003. "Forward trading and storage in a Cournot duopoly," Journal of Economic Dynamics and Control, Elsevier, vol. 27(4), pages 651-665, February.
    14. van Damme, Eric & Hurkens, Sjaak, 1997. "Games with Imperfectly Observable Commitment," Games and Economic Behavior, Elsevier, vol. 21(1-2), pages 282-308, October.
    15. repec:bla:econom:v:52:y:1985:i:205:p:93-101 is not listed on IDEAS
    16. Paul Klemperer & Margaret Meyer, 1986. "Price Competition vs. Quantity Competition: The Role of Uncertainty," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 618-638, Winter.
    17. Larry Arvan, 1985. "Some Examples of Dynamic Cournot Duopoly with Inventory," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 569-578, Winter.
    18. Pal, Debashis, 1991. "Cournot duopoly with two production periods and cost differentials," Journal of Economic Theory, Elsevier, vol. 55(2), pages 441-448, December.
    19. 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.
    20. Blaise Allaz & Jean-Luc Vila, 1993. "Cournot Competition, Forward Markets and Efficiency," Post-Print hal-00511806, HAL.
    21. Unknown, 1986. "Letters," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 1(4), pages 1-9.
    22. Thille, Henry, 2006. "Inventories, market structure, and price volatility," Journal of Economic Dynamics and Control, Elsevier, vol. 30(7), pages 1081-1104, July.
    23. Novshek, William, 1984. "Finding All n-Firm Cournot Equilibria," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 61-70, February.
    24. Romano, Richard & Yildirim, Huseyin, 2005. "On the endogeneity of Cournot-Nash and Stackelberg equilibria: games of accumulation," Journal of Economic Theory, Elsevier, vol. 120(1), pages 73-107, January.
    25. Bamon, Rodrigo & Fraysse, Jean, 1985. "Existence of Cournot Equilibrium in Large Markets," Econometrica, Econometric Society, vol. 53(3), pages 587-597, May.
    26. Liski, Matti & Montero, Juan-Pablo, 2006. "Forward trading and collusion in oligopoly," Journal of Economic Theory, Elsevier, vol. 131(1), pages 212-230, November.
    27. Pal, Debashis, 1996. "Endogenous Stackelberg Equilibria with Identical Firms," Games and Economic Behavior, Elsevier, vol. 12(1), pages 81-94, January.
    28. Amihud, Yakov & Medenelson, Haim, 1989. "Inventory behaviour and market power: An empirical investigation," International Journal of Industrial Organization, Elsevier, vol. 7(2), pages 269-280, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xiaowei Hu & Jaejin Jang & Nabeel Hamoud & Amirsaman Bajgiran, 2021. "Strategic Inventories in a Supply Chain with Downstream Cournot Duopoly," Papers 2109.06995, arXiv.org, revised Jan 2022.
    2. Lenhard, Severin, 2022. "Imperfect competition with costly disposal," International Journal of Industrial Organization, Elsevier, vol. 82(C).
    3. repec:lic:licosd:43022 is not listed on IDEAS
    4. Fabio Antoniou & Raffaele Fiocco, 2019. "Strategic inventories under limited commitment," RAND Journal of Economics, RAND Corporation, vol. 50(3), pages 695-729, September.
    5. Lenhard, Severin, 2022. "Imperfect Competition with Costly Disposal," VfS Annual Conference 2022 (Basel): Big Data in Economics 264038, Verein für Socialpolitik / German Economic Association.
    6. Mitraille, Sébastien & Thille, Henry, 2014. "Speculative storage in imperfectly competitive markets," International Journal of Industrial Organization, Elsevier, vol. 35(C), pages 44-59.
    7. Sébastien Mitraille & Henry Thille, 2020. "Strategic advance sales, demand uncertainty and overcommitment," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 69(3), pages 789-828, April.
    8. Severin Lenhard, 2021. "Imperfect Competition with Costly Disposal," Diskussionsschriften dp2105, Universitaet Bern, Departement Volkswirtschaft.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. MITRAILLE Sébastien & MOREAUX Michel, 2007. "Inventories and Endogenous Stackelberg Hierarchy in Two-period Cournot Oligopoly," LERNA Working Papers 07.02.223, LERNA, University of Toulouse.
    2. Sébastien Mitraille & Henry Thille, 2020. "Strategic advance sales, demand uncertainty and overcommitment," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 69(3), pages 789-828, April.
    3. Lenhard, Severin, 2022. "Imperfect competition with costly disposal," International Journal of Industrial Organization, Elsevier, vol. 82(C).
    4. Breitmoser, Yves, 2010. "A general model of oligopoly endogenizing Cournot, Bertrand, Stackelberg, and Allaz-Vila," MPRA Paper 19998, University Library of Munich, Germany.
    5. Breitmoser, Yves, 2012. "On the endogeneity of Cournot, Bertrand, and Stackelberg competition in oligopolies," International Journal of Industrial Organization, Elsevier, vol. 30(1), pages 16-29.
    6. Lenhard, Severin, 2022. "Imperfect Competition with Costly Disposal," VfS Annual Conference 2022 (Basel): Big Data in Economics 264038, Verein für Socialpolitik / German Economic Association.
    7. Kurt Annen, 2019. "On the first mover advantage in Stackelberg quantity games," Journal of Economics, Springer, vol. 126(3), pages 249-258, April.
    8. Kurt Annen, 2016. "Do Firms Sell What They Produce or Produce What They Sell?," Working Papers 1606, University of Guelph, Department of Economics and Finance.
    9. Fabio Antoniou & Raffaele Fiocco, 2019. "Strategic inventories under limited commitment," RAND Journal of Economics, RAND Corporation, vol. 50(3), pages 695-729, September.
    10. Edmond Baranes & François Mirabel & Jean-Christophe Poudou, 2007. "Concurrence et stockage stratégique sur le marché gazier," Economie & Prévision, La Documentation Française, vol. 0(2), pages 25-40.
    11. Baranes, Edmond & Mirabel, François & Poudou, Jean-Christophe, 2014. "Access to natural gas storage facilities: Strategic and regulation issues," Energy Economics, Elsevier, vol. 41(C), pages 19-32.
    12. Poddar, Sougata & Sasaki, Dan, 2002. "The strategic benefit from advance production," European Journal of Political Economy, Elsevier, vol. 18(3), pages 579-595, September.
    13. Henry Thille & Sebastien Mitraille, 2022. "Advance sales and deterrence with heterogeneous firms," Working Papers 2201, University of Guelph, Department of Economics and Finance.
    14. Breton, Michèle & Kharbach, Mohammed, 2008. "The welfare effects of unbundling gas storage and distribution," Energy Economics, Elsevier, vol. 30(3), pages 732-747, May.
    15. Liski, Matti & Montero, Juan-Pablo, 2014. "Forward trading in exhaustible-resource oligopoly," Resource and Energy Economics, Elsevier, vol. 37(C), pages 122-146.
    16. Vettas, Nikolaos & Biglaiser, Gary, 2004. "Dynamic Price Competition with Capacity Constraints and Strategic Buyers," CEPR Discussion Papers 4315, C.E.P.R. Discussion Papers.
    17. David P. Brown & Andrew Eckert, 2017. "Electricity market mergers with endogenous forward contracting," Journal of Regulatory Economics, Springer, vol. 51(3), pages 269-310, June.
    18. Kovenock, Dan & Roy, Suddhasatwa, 1998. "Dynamic capacity choice in a Bertrand-Edgeworth frameqork," Journal of Mathematical Economics, Elsevier, vol. 29(2), pages 135-160, March.
    19. Cumbul, Eray, 2021. "Stackelberg versus Cournot oligopoly with private information," International Journal of Industrial Organization, Elsevier, vol. 74(C).
    20. Breitmoser, Yves, 2013. "Increasing marginal costs are strategically beneficial in forward trading," Economics Letters, Elsevier, vol. 119(2), pages 109-112.

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tse:wpaper:24803. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/tsetofr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.