Monday, June 29, 2015

Ranking Bertrand, Cournot and Supply Function Equilibria in Oligopoly

Flavio Delbono, University of Bologna Luca Lambertini, University of Bologna are Ranking Bertrand, Cournot and Supply Function Equilibria in Oligopoly.

ABSTRACT:  We show that the standard argument according to which supply function equilibria rank intermediate between Bertrand and Cournot equilibria may be reversed. We prove this result within a static oligopolistic game in which both supply function competition and Cournot competition yield a unique Nash equilibrium, whereas price setting yields a continuum of Nash equilibria. There are parameter regions in which Bertrand profits are higher than Cournot ones, with the latter being higher than in the supply function equilibrium. Such reversal of the typical ranking occurs when price-setting mimics collusion. We then show that the reversal in profits is responsible for a reversal in the welfare performance of the industry.

https://lawprofessors.typepad.com/antitrustprof_blog/2015/06/ranking-bertrand-cournot-and-supply-function-equilibria-in-oligopoly.html

| Permalink

TrackBack URL for this entry:

https://www.typepad.com/services/trackback/6a00d8341bfae553ef01b7c78f8489970b

Listed below are links to weblogs that reference Ranking Bertrand, Cournot and Supply Function Equilibria in Oligopoly:

Comments

Post a comment