Bilateral oligopoly and quantity competition

Alex Dickson, Roger Hartley

Research output: Contribution to journalArticle

5 Citations (Scopus)

Abstract

Bilateral oligopoly is a market game with two commodities, allowing strategic behavior on both sides of the market. When the number of buyers is large, bilateral oligopoly approximates a game of quantity competition played by sellers. We present examples which show that this is not typically a Cournot game. Rather, we introduce an alternative game of quantity competition (the market share game) and, appealing to results in
the literature on contests, show that this yields the same equilibria as the many-buyer limit of bilateral oligopoly, under standard assumptions on costs and preferences. \ We also show that the market share and Cournot games have the same equilibria if and only if the price elasticity of the latter is one, and investigate the differences in equilibria otherwise. These results lead to necessary and sufficient conditions for the Cournot game to be a good approximation to bilateral oligopoly with many buyers and to an ordering of total output when they are not satisfied.
Original languageEnglish
Pages (from-to)979-1004
Number of pages26
JournalEconomic Theory
Volume52
Issue number3
Early online date18 Oct 2011
DOIs
Publication statusPublished - Apr 2013

Keywords

  • game theory
  • economics
  • social behaviour
  • quantity competition
  • cournot

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