Market making oligopoly
This paper analyzes price competition between market makers who set costly capacity constraints before they intermediate between producers and consumers. The key finding is that the unique perfect equilibrium outcome is Cournot if capacity is costly and rationing efficient. This result is interesting for two main reasons: It generalizes Kreps and Scheinkman (1983) to an arbitrary number of market makers, and it contrasts with Stahl (1988) and the broader literature on market making, such as Gehrig (1993), Fingleton (1997) and Rust and Hall (2003), where due to the absence of capacity constraints on the input market the Bertrand paradox typically prevails.
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- Boccard, Nicolas & Wauthy, Xavier, 2000.
"Bertrand competition and Cournot outcomes: further results,"
Elsevier, vol. 68(3), pages 279-285, September.
- BOCCARD , Nicolas & WAUTHY, Xavier, . "Bertrand competition and Cournot outcomes: futher results," CORE Discussion Papers RP 1474, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Caillaud, Bernard & Jullien, Bruno, 2001. "Competing cybermediaries," European Economic Review, Elsevier, vol. 45(4-6), pages 797-808, May.
- Raymond Deneckere & Dan Kovenock, 1988.
773, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- repec:ebl:ecbull:v:4:y:2003:i:30:p:1-8 is not listed on IDEAS
- Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-66, May.
- Glenn Ellison & Drew Fudenberg, 2003.
"Knife-Edge or Plateau: When Do Market Models Tip?,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 118(4), pages 1249-1278.
- Glenn Ellison & Drew Fudenberg, 2003. "Knife-Edge or Plateau: When do Market Models Tip?," Levine's Working Paper Archive 506439000000000098, David K. Levine.
- Fudenberg, Drew & Ellison, Glenn, 2003. "Knife-Edge or Plateau: When Do Market Models Tip?," Scholarly Articles 3160493, Harvard University Department of Economics.
- Glenn Ellison & Drew Fudenberg, 2003. "Knife Edge of Plateau: When Do Market Models Tip?," NBER Working Papers 9528, National Bureau of Economic Research, Inc.
- Boccard, Nicolas & Wauthy, Xavier, 2004. "Bertrand competition and Cournot outcomes: a correction," Economics Letters, Elsevier, vol. 84(2), pages 163-166, August.
- Daniel F. Spulber, 1996. "Market Making by Price-Setting Firms," Review of Economic Studies, Oxford University Press, vol. 63(4), pages 559-580.
- Levitan, Richard & Shubik, Martin, 1972.
"Price Duopoly and Capacity Constraints,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(1), pages 111-22, February.
- Sam Peltzman, 1998.
"Prices Rise Faster Than They Fall,"
University of Chicago - George G. Stigler Center for Study of Economy and State
142, Chicago - Center for Study of Economy and State.
- Fingleton, John, 1997. "Competition among Middlemen When Buyers and Sellers Can Trade Directly," Journal of Industrial Economics, Wiley Blackwell, vol. 45(4), pages 405-27, December.
- Partha Dasgupta & Eric Maskin, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, I: Theory," Review of Economic Studies, Oxford University Press, vol. 53(1), pages 1-26.
- Mark Armstrong, 2006.
"Competition in two‐sided markets,"
RAND Journal of Economics,
RAND Corporation, vol. 37(3), pages 668-691, 09.
- John Rust & George Hall, 2002.
"Middlemen versus Market Makers: A Theory of Competitive Exchange,"
NBER Working Papers
8883, National Bureau of Economic Research, Inc.
- John Rust & George Hall, 2003. "Middlemen versus Market Makers: A Theory of Competitive Exchange," Journal of Political Economy, University of Chicago Press, vol. 111(2), pages 353-403, April.
- John Rust & George Hall, 2001. "Middle Men Versus Market Makers: A Theory of Competitive Exchange," Cowles Foundation Discussion Papers 1299, Cowles Foundation for Research in Economics, Yale University.
- Stahl, Dale O, II, 1988. "Bertrand Competition for Inputs and Walrasian Outcomes," American Economic Review, American Economic Association, vol. 78(1), pages 189-201, March.
- Thomas Gehrig, 1993.
"Intermediation in Search Markets,"
1058, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- repec:rus:hseeco:72158 is not listed on IDEAS
- Dan Kovenock & Raymond J. Deneckere, 1996. "Bertrand-Edgeworth duopoly with unit cost asymmetry (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(1), pages 1-25.
- Yanelle, Marie-Odile, 1989. "The strategic analysis of intermediation," European Economic Review, Elsevier, vol. 33(2-3), pages 294-301, March.
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