Price vs Quantity in a Dynamic Duopoly Game with Capacity Accumulation.

Lambertini, Luca ; Cellini, Roberto (2002) Price vs Quantity in a Dynamic Duopoly Game with Capacity Accumulation. Bologna: Dipartimento di Scienze economiche DSE, p. 25. DOI 10.6092/unibo/amsacta/4847. In: Quaderni - Working Paper DSE (449). ISSN 2282-6483.
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Abstract

We present a differential duopoly game with capacity accumulation, wherethe closed-loop memoryless Nash equilibrium collapses into the open-loop Nash equilibrium. Sy mmetric Bertrand and Cournot equilibria are observationally equivalent. This result encompasses the conclusions of the well known model Kreps and Scheinkman (1983) concerning the equivalence between the Bertrand and Cournot settings in a static two-stage game. However, in the dynamic framevork, the equilibrium outcome is different, when one firm plays à la Bertrand and the other à la Cournot. This has relevant bearings upon firms` endogenous choice of the market variable, as well as the social desirability of prices vs quantities. For some admissible parameter ranges, the conflict between private and social incentives concerning the choice between prices and quantity disappears.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Lambertini, Luca
Cellini, Roberto
Keywords
differential games, capacity accumulation, price setting, quantity setting.
Subjects
ISSN
2282-6483
DOI
Deposit date
14 Mar 2016 15:55
Last modified
14 Mar 2016 15:55
URI

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