Inventories and Endogenous Stackelberg Leadership in Two-period Cournot Oligopoly

Posted by D. Daniel Sokol

Sebastien Mitraille (Toulouse Business School) and Michel Moreaux (Toulouse School of Economics (IDEI and LERNA)) discuss Inventories and Endogenous Stackelberg Leadership in Two-period Cournot Oligopoly.

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.