Ex ante and ex post equilibrium supply curves

Flavio Menezes and John Quiggin

No 649, Discussion Papers Series from University of Queensland, School of Economics

Abstract: A number of writers have modelled imperfect markets using games in which the strategies are supply functions, that is, mappings from prices to quantities produced. Two representations of this problem have beenanalyzed, which may be referred to as ex ante and ex post, depending on whether strategies are chosen before or after demand shocks are observed. In this paper, we examine the relationship between equilibria in supply curves derived using the ex ante and ex post approaches. We derive conditions under which a linear ex ante solution coincides with the ex post solution. These conditions generalize the case of linear demand and quadratic cost, analyzed by Klemperer and Meyer. We demonstrate that all ex ante solutions derived in this way are unique.

Date: 2021-11-16
New Economics Papers: this item is included in nep-gth and nep-reg
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