On the Markovian efficiency of Bertrand and Cournot equilibria

Luca Colombo and Paola Labrecciosa

Journal of Economic Theory, 2015, vol. 155, issue C, 332-358

Abstract: We characterize and compare closed-loop (feedback) price and quantity strategies within a full-fledged dynamic model of oligopolistic competition in which production requires exploitation of a renewable productive asset. Unlike previous papers on the strategic exploitation of productive assets, we allow for imperfect product substitutability, which enables us to deal with price competition. We show that the traditional result that the Bertrand equilibrium is more efficient than the Cournot equilibrium does not necessarily hold in a Markovian environment, either in the short-run or at the stationary equilibrium, or using the discounted sum of welfare as a criterion for relative efficiency.

Keywords: Closed-Loop Nash Equilibria; Market efficiency; Product differentiation; Productive asset oligopoly (search for similar items in EconPapers)
JEL-codes: C73 D43 L13 Q20 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:155:y:2015:i:c:p:332-358

DOI: 10.1016/j.jet.2014.11.007

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