Technical Note—Multimarket Cournot Equilibria with Heterogeneous Resource-Constrained Firms

René Caldentey () and Martin B. Haugh ()
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René Caldentey: Booth School of Business, The University of Chicago, Chicago, Illinois 60637
Martin B. Haugh: Department of Analytics, Marketing and Operations, Imperial College Business School, Imperial College, London SW7 2AZ, United Kingdom

Operations Research, 2024, vol. 72, issue 3, 940-956

Abstract: We study Cournot competition among firms in a multimarket framework where each of the firms face different budget/capacity constraints. We assume independent linear inverse demand functions for each market and completely characterize the resulting unique equilibrium. Specifically, we introduce the notions of augmented and cutoff budgets for firms and markets, respectively. We show, for example, that firm i operates in market j if and only if firm i ’s augmented budget is greater than market j ’s cutoff budget. We also study the properties of the equilibrium as a function of the number of firms N while keeping the aggregate budget fixed. In a numerical study, we show that increasing N increases the total output across all markets although this monotonicity can fail to hold at the individual market level. Similarly, we show that that, although the firms’ cumulative payoff decreases in N , the consumer surplus and social surplus increase in N .

Keywords: Operations and Supply Chains; Cournot competition; noncooperative games; heterogeneous products; heterogeneous firms; capacity constraints (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:inm:oropre:v:72:y:2024:i:3:p:940-956

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