On the Relationship Between Quantity Precommitment and Cournot Games

Amr Farahat (), Woonghee Tim Huh () and Hongmin Li ()
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Amr Farahat: Olin Business School, Washington University in St. Louis, St. Louis, Missouri 63130
Woonghee Tim Huh: Sauder School of Business, University of British Columbia, Vancouver, British Columbia V6T 1Z2, Canada
Hongmin Li: W.P. Carey School of Business, Arizona State University, Tempe, Arizona 85287

Operations Research, 2019, vol. 67, issue 1, 109-122

Abstract: We study a two-stage deterministic differentiated-product oligopoly competition game, called the quantity precommitment game, in which firms compete on quantity in the first stage and then compete on price in the second stage. We compare this game with a single-stage Cournot game, in which firms compete on quantity only and prices are set to clear the market. We show that any equilibrium of the quantity precommitment game is an equilibrium of the Cournot game under certain conditions that allow for commonly used demand functions and general spill models. Our approach yields insight into key properties that enable this relationship to hold.

Keywords: competition; quantity and capacity decisions; pricing; differentiated products; substitution; spill effects (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (3)

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