To Adjust or not to Adjust after a Cost-Push Shock? A Simple Duopoly Model with (and without) Resilience
Luca Lambertini () and
Luigi Marattin ()
Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna
We characterize the equilibrium in a homogeneous good Cournot duopoly in which firms have the choice to react to a cost-push shock by paying a lump-sum adjustment cost in order to offset the initial rise in marginal cost. Our results show that the size of the shock and the size of the adjustment cost jointly determine the nature and the number of the equilibria generated in the game. In particular, if the adjustment cost is high enough, at least one firm decides not to adjust at the pure strategy equilibrium, and such a partial adjustment by the industry can be socially efficient as well. Some implications of this partial equilibrium analysis about an industry' resilience are outlined.
JEL-codes: D43 E30 L13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-mac and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Journal Article: To adjust or not to adjust after a cost-push shock? A simple duopoly model with (and without) resilience (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:wp970
Access Statistics for this paper
More papers in Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna Contact information at EDIRC.
Bibliographic data for series maintained by Dipartimento Scienze Economiche, Universita' di Bologna ().