Ranking Bertrand, Cournot and Supply Function Equilibria in Oligopoly

Delbono, Flavio ; Lambertini, Luca (2015) Ranking Bertrand, Cournot and Supply Function Equilibria in Oligopoly. Bologna: Dipartimento di Scienze economiche DSE, p. 19. DOI 10.6092/unibo/amsacta/4226. In: Quaderni - Working Paper DSE (1000). ISSN 2282-6483.
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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.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Delbono, Flavio
Lambertini, Luca
Keywords
convex costs, supply function, price competition, quantity competition
Subjects
ISSN
2282-6483
DOI
Deposit date
09 Apr 2015 12:05
Last modified
21 Oct 2015 09:43
URI

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