Ranking Bertrand, Cournot and Supply Function Equilibria in Oligopoly

Flavio Delbono and Luca Lambertini (luca.lambertini@unibo.it)

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

Abstract: We show that the standard argument according to which supply function equilibria rank intermediate between Bertrand and Cournot equilibria may be reversed. We prove this result within a static oligopolistic game in which both supply function competition and Cournot competition yield a unique Nash equilibrium, whereas price setting yields a continuum of Nash equilibria. There are parameter regions in which Bertrand profits are higher than Cournot ones, with the latter being higher than in the supply function equilibrium. Such reversal of the typical ranking occurs when price-setting mimics collusion. We then show that the reversal in profits is responsible for a reversal in the welfare performance of the industry.

JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 2015-04
New Economics Papers: this item is included in nep-com
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Related works:
Journal Article: Ranking Bertrand, Cournot and supply function equilibria in oligopoly (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:wp1000

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