Dynamic Duopoly with Intertemporal Capacity Constraints
We analyze strategic firm behavior in settings where the production stage is followed by several periods during which only sales take place. We analyze the dynamics of the market structure, the development of prices and sales over time, and the implications for profits and consumer surplus. Two specific settings are analyzed. In the first, a firm can commit up-front to a sales strategy that does not depend on the actual sales of its competitor. In this case there is a unique Nash equilibrium and price increases over time. In the second setting,there is no commitment and firms can adjust their sales in response to observed supply of their competitor in the previous period. It is shown that in this case a subgame perfect Nash equilibrium does not always exist. Equilibria can have surprising features. For some parameter constellations, price may decrease over time. It is also possible that the firm increases its pro�t by destroying some of its production. When firms have equal size, the equilibrium outcome is the same in both the commitment and the non-commitment setting. In general, the setting without commitment is bene�cial to the larger firm, whereas the setting with commitment leads to higher pro�ts for the smaller firm.
|Date of creation:||2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +31 (0)43 38 83 830
Web page: http://www.maastrichtuniversity.nl/
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.:
- GABSZEWICZ, Jean J. & PODDAR , Sougata, 1995.
"Demand Fluctuations and Capacity Utilization under Duopoly,"
CORE Discussion Papers
1995051, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Jean J. Gabszewicz & Sougata Poddar, 1997. "Demand fluctuations and capacity utilization under duopoly," Economic Theory, Springer, vol. 10(1), pages 131-146.
- Gabszewicz, J.J. & Poddar, S., . "Demand fluctuations and capacity utilization under duopoly," CORE Discussion Papers RP -1269, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Biglaiser, Gary & Vettas, Nikolaos, 2004. "Dynamic Price Competition with Capacity Constraints and Strategic Buyers," CEPR Discussion Papers 4315, C.E.P.R. Discussion Papers.
- Lewis, Tracy R & Schmalensee, Richard, 1980.
"On Oligopolistic Markets for Nonrenewable Natural Resources,"
The Quarterly Journal of Economics,
MIT Press, vol. 95(3), pages 475-91, November.
- Lewis, Tracy R. & Schmalensee, Richard., 1979. "On oligopolistic markets for nonrenewable natural resources," Working papers 1052-79., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Gérard Gaudet & Ngo Van Long, 1991.
"On the Effects of the Distribution of Initial Endowments in a non Renewable Resource Duopoly,"
Cahiers de recherche du Département des sciences économiques, UQAM
9202, Université du Québec à Montréal, Département des sciences économiques.
- Gaudet, Gerard & Long, Ngo Van, 1994. "On the effects of the distribution of initial endowments in a nonrenewable resource duopoly," Journal of Economic Dynamics and Control, Elsevier, vol. 18(6), pages 1189-1198, November.
- Osborne, Martin J. & Pitchik, Carolyn, 1983.
"Price Competition in a Capacity-Constrained Duopoly,"
83-08, C.V. Starr Center for Applied Economics, New York University.
- Osborne, Martin J. & Pitchik, Carolyn, 1986. "Price competition in a capacity-constrained duopoly," Journal of Economic Theory, Elsevier, vol. 38(2), pages 238-260, April.
- Saloner, Garth, 1987. "Cournot duopoly with two production periods," Journal of Economic Theory, Elsevier, vol. 42(1), pages 183-187, June.
- Salo, Seppo & Tahvonen, Olli, 2001. "Oligopoly equilibria in nonrenewable resource markets," Journal of Economic Dynamics and Control, Elsevier, vol. 25(5), pages 671-702, May.
- David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
When requesting a correction, please mention this item's handle: RePEc:unm:umamet:2009018. 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: (Charles Bollen)
If references are entirely missing, you can add them using this form.