A Two Stage Duopoly Model with Demand Uncertainty

Morten Hviid

No 89-08, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: The paper analyses the effect of uncertainty in a two stage duopoly model in which firms first choose capacity, then prices. We show that no pure strategy Nash equilibrium exists regardless of whether the realization of demand is known to firms before or after they choose their prices. On the other hand, we show that a mixed strategy equilibrium exists.

Date: 1989-03
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