A model of market competition as a prize contest or a model of strife for market domination

Gerasimos Soldatos

SN Business & Economics, 2021, vol. 1, issue 1, 1-9

Abstract: Abstract This article assumes that firm behavior concentrates on market share reflecting a view of the market as a contest prize. Perfectly competitive firms induce thus Cournot competition while monopolistically-competitive firms prompt the appearance of a differentiated Cournot environment. In any case, monopoly or a winner-takes-all result cannot be a Nash equilibrium. In terms of aggregative games, the equilibrium is a draw, and despite the equivalence between contests and best-response potential, Cournot outcomes are found to differ from contest ones. The result that diversity is superior to homogeneity is confirmed here, too. Competition intensity is independent of market concentration and product homogeneity or heterogeneity. The novelty of the paper in terms of methodology is that these results are obtained within the context of a process of market-share rather than quantity competition under perfect or monopolistic competition that produces a quantity–oligopoly equilibrium. Aggregative-game treatments of such an oligopoly take its presence as a given, they do not motivate its emergence, and arrive at equilibrium based on quantity competition.

Keywords: Market as a prize-contest; Perfect competition; Monopolistic competition; Cournot oligopoly; Monopoly (search for similar items in EconPapers)
JEL-codes: D41 D42 D43 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s43546-020-00035-4

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