Generalized Quantity Competition for Multiple Products and Loss of Efficiency

Jonathan Kluberg () and Georgia Perakis ()
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Jonathan Kluberg: Operations Research Center, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139
Georgia Perakis: Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139

Operations Research, 2012, vol. 60, issue 2, 335-350

Abstract: We study a generalized model of quantity (Cournot) oligopolistic competition. The impact of competition on social surplus and firms' profit is analyzed. Firms produce multiple differentiated products and face production constraints. We compare the social surplus produced by competing firms and by colluding firms with the maximum achievable total surplus in the market. Similarly, we quantify the loss of profit that firms incur by competing instead of colluding. Our goal is to understand how the presence of competition affects the firms and society as a whole, but also to determine what are the key drivers of the inefficiencies that arise due to competition.

Keywords: noncooperative games; bidding; Cournot competition (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (12)

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