Bilateral Oligopoly and Quantity Competition

Alex Dickson, Roger Hartley

Research output: Working paperDiscussion paper

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Abstract

Bilateral oligopoly is a strategic market game with two commodities, allowing strategic behavior on both sides of the market. When the number of buyers is large, such a game 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. 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
Place of PublicationGlasgow
PublisherUniversity of Strathclyde
Pages1-27
Number of pages28
Volume09
Publication statusPublished - 9 Oct 2009

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Bilateral oligopoly
Quantity competition
Buyers
Cournot game
Market share
Price elasticity
Seller
Strategic market games
Costs
Commodities
Contests
Approximation
Strategic behavior

Keywords

  • quantity competition
  • cournot
  • strategic foundation
  • commitment

Cite this

Dickson, A., & Hartley, R. (2009). Bilateral Oligopoly and Quantity Competition. (22 ed.) (pp. 1-27). Glasgow: University of Strathclyde.
Dickson, Alex ; Hartley, Roger. / Bilateral Oligopoly and Quantity Competition. 22. ed. Glasgow : University of Strathclyde, 2009. pp. 1-27
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Dickson, A & Hartley, R 2009 'Bilateral Oligopoly and Quantity Competition' 22 edn, University of Strathclyde, Glasgow, pp. 1-27.

Bilateral Oligopoly and Quantity Competition. / Dickson, Alex; Hartley, Roger.

22. ed. Glasgow : University of Strathclyde, 2009. p. 1-27.

Research output: Working paperDiscussion paper

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Dickson A, Hartley R. Bilateral Oligopoly and Quantity Competition. 22 ed. Glasgow: University of Strathclyde. 2009 Oct 9, p. 1-27.