MARKET MAKING OLIGOPOLY -super-*
Simon Loertscher ()
Journal of Industrial Economics, 2008, vol. 56, issue 2, 263-289
This paper analyzes price competition between market makers who set costly capacity constraints before they intermediate between producers and consumers. The unique equilibrium outcome with pure strategies at the capacity stage is the Cournot outcome. The paper thus provides a rationale for Cournot-type competition between market makers. This contrasts with previous findings in the literature, where due to the absence of capacity constraints that are set ex ante the Bertrand result typically obtains. Copyright 2008 The Author. Journal compilation 2008 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics.
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