On the Optimal Number of Firms in the Commons: Cournot vs Bertrand

Davide Dragone, Luca Lambertini (), Arsen Palestini () and Alessandro Tampieri

Mathematical Economics Letters, 2013, vol. 1, issue 1, 25-34

Abstract: We revisit the debate on the optimal number of firms in the commons in a differential oligopoly game in which firms are either quantity- or price-setting agents. Production exploits a natural resource and involves a negative externality. We calculate the number of firms maximising industry profits, finding that it is larger in the Cournot case. While industry structure is always inefficient under Bertrand behaviour, it may or may not be so under Cournot behaviour, depending on parameter values. The comparison of private industry optima reveals that the Cournot steady state welfare level exceeds the corresponding Bertrand magnitude if the weight of the stock of pollution is large enough.

Keywords: Differential games; oligopoly; renewable resources; pollution; Differential games; oligopoly; renewable resources; pollution (search for similar items in EconPapers)
Date: 2013
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Working Paper: On the Optimal Number of Firms in the Commons: Cournot vs Bertrand (2012)
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DOI: 10.1515/mel-2013-0011

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