Capacity precommitment and price competition yield Cournot outcomes

Diego Moreno () and Luis Úbeda

Economics Working Papers from Universidad Carlos III, Departamento de Economía

Abstract: We study an industry of a homogeneous good where n firms with identical technology compete by first building capacity, and then, after observing the capacity decisions, choosing a “reservation price” at which they are willing to sell their entire capacities. We show that every pure strategy equilibrium yields the Cournot outcome, and that the Cournot outcome can be sustained by a pure strategy subgame perfect equilibrium.

Date: 2001-01
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Persistent link: http://EconPapers.repec.org/RePEc:cte:werepe:we014408

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