The Environmental Impact of Bertrand and Cournot Duopolies. A Cautionary Note

Luca Lambertini () and Alessandro Tampieri

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

Abstract: We compare a Bertrand with a Cournot duopoly in a setting where production is polluting and exploits natural resources, and firms bear convex production costs. We adopt Dastidar's (1995) approach, yielding a continuum of Bertrand-Nash equilibria ranging above marginal cost pricing also, to show that softening price competition may lead to a lower output production in a Bertrand rather than a Cournot industry. The market structure bringing about the lowest output determines the highest social welfare, given the fact that the negative environmental effects of production more than offset the gain in consumer surplus.

JEL-codes: L13 L51 Q55 Q58 (search for similar items in EconPapers)
Date: 2012-02
New Economics Papers: this item is included in nep-com and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:wp812

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