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Tuesday, January 26, 2010

A general model of oligopoly endogenizing Cournot, Bertrand, Stackelberg, and Allaz-Vila

Posted by D. Daniel Sokol

Yves Breitmoser (Faculty of Business Administration, Europa-Universit├Ąt Viadrina) provides A general model of oligopoly endogenizing Cournot, Bertrand, Stackelberg, and Allaz-Vila.

ABSTRACT: This paper analyzes a T-stage model of oligopoly where firms build up capacity and conclude forward sales in stages t<T, and they choose production quantities in t=T. We consider the case of n firms with asymmetric marginal costs. In the two-stage game, the set of outcomes is a quasi-hyperrectangle including Cournot, Allaz-Vila, and all two-stage Stackelberg outcomes. In general, it consists of T-1 such hyperrectangles where the lower bound approaches the Bertrand outcome as T tends to infinity. In the limit, a range of outcomes stretching from Cournot via Stackelberg to Bertrand can result in equilibrium, i.e. the mode of competition is entirely endogenous.

http://lawprofessors.typepad.com/antitrustprof_blog/2010/01/a-general-model-of-oligopoly-endogenizing-cournot-bertrand-stackelberg-and-allazvila-.html

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