Price-Quantity Competition of Farsighted Firms: Toughness vs. Collusion

Marina Sandomirskaia

HSE Working papers from National Research University Higher School of Economics

Abstract: The paper examines an interaction of boundedly rational firms that are able to calculate their gains after reaction of an opponent to their own deviations from the current strategy. We consider an equilibrium concept that we call a Nash-2 equilibrium. We discuss the problem of existence and possible multiplicity of such equilibria, relation to infinite rationality approach of folk theorem and security considerations of equilibrium in secure strategies. For a number of models (Bertrand with homogeneous and heterogeneous product, Cournot, Tullock competition) the Nash-2 equilibrium sets are obtained and considered as tacit collusion or strong competition in dependence of additional security considerations

Keywords: Nash-2 equilibrium; secure deviation; secure profile; Bertrand model; Cournot duopoly; differentiated product; Tullock contest; tacit collusion; tough competition. (search for similar items in EconPapers)
JEL-codes: C72 D03 D43 D70 L13 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2015
New Economics Papers: this item is included in nep-com and nep-gth
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Citations: View citations in EconPapers (1)

Published in WP BRP Series: Economics / EC, April 2015, pages 1-18

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