Investigating the Strategic Nature of Supply Functions in Oligopoly

Delbono, Flavio ; Lambertini, Luca (2015) Investigating the Strategic Nature of Supply Functions in Oligopoly. Bologna: Dipartimento di Scienze economiche DSE, p. 23. DOI 10.6092/unibo/amsacta/4283. In: Quaderni - Working Paper DSE (1011). ISSN 2282-6483.
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Abstract

We show that supply functions cannot be classified as either strategic complements or substitutes according to the twofold criterion advanced by Bulow et al. (1985). This is because while the slope of the best reply is univocally positive, this is not the case with the sign of the cross derivative of marginal profit. We first show this discrepancy in the original Klemperer and Meyer (1989) setting, and then in a linear-quadratic model of differentiated duopoly. We further confirm and strengthen our result by proving that the game in supply functions is neither supermodular nor submodular.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Delbono, Flavio
Lambertini, Luca
Keywords
supply function, lattice theory, strategic complements, strategic substitutes, super/submodularity
Subjects
ISSN
2282-6483
DOI
Deposit date
15 Jun 2015 09:45
Last modified
21 Oct 2015 10:00
URI

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