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Product Differentiation, the Volume of Trade and Profits under Cournot and Bertrand Duopoly

David Collie and Vo Phuong Mai Le

No E2011/26, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: This paper analyses how product differentiation affects the volume of trade under duopoly using Shubik-Levitan demand functions rather than the Bowley demand functions used by Bernhofen (2001). The Shubik-Levitan demand functions have the advantage that an increase in product differentiation does not increase the size of the market as happens with the Bowley demand functions. It is shown that the volume of trade in terms of quantities is decreasing in the degree of product differentiation when the trade cost is relatively low, but increasing in the degree of product differentiation when the trade cost is relatively high.

Keywords: Product Differentiation; Cournot Oligopoly; Bertrand Oligopoly (search for similar items in EconPapers)
JEL-codes: F12 F13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-com and nep-int
Date: 2011-11
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Journal Article: Product Differentiation, the Volume of Trade and Profits under Cournot and Bertrand Duopoly (2015) Downloads
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