On Welfare under Cournot and Bertrand Competition in Differentiated Oligopolies
Hackner (2000) shows that in a differentiated oligopoly with more than two firms , prices may be higher under Bertrand competition than under Cournot competition, implying that the classicalresult of Singh and Vives (1984) that Bertrand prices are always lower than Cournot prices is sensitive to the duopoly assumption. Hackner (2000), however, leaves unanswered the important question of whether welfare may be lower under price competition. This note shows that in Hackners model both consumer surplus and total surplus are higher under price competition than under quantity competition regardless of whether goods are substitutes or complements.
|Date of creation:||15 Jun 2005|
|Date of revision:|
|Publication status:||Published in Review of Industrial Organization 2005|
|Note:||Length: 10 pgs.|
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- Dixit, Avinash K., 1978.
"A Model of Duopoly Suggesting a Theory of Entry Barriers,"
The Warwick Economics Research Paper Series (TWERPS)
125, University of Warwick, Department of Economics.
- Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
- Häckner, Jonas, 1999.
"A Note on Price and Quantity Competition in Differentiated Oligopolies,"
Research Papers in Economics
1999:9, Stockholm University, Department of Economics.
- Hackner, Jonas, 2000. "A Note on Price and Quantity Competition in Differentiated Oligopolies," Journal of Economic Theory, Elsevier, vol. 93(2), pages 233-239, August.
- Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
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