Dynamic Duopoly with Congestion Effects

Didier Laussel (), Maxime de Montmarin and Ngo Long

CIRANO Working Papers from CIRANO

Abstract: We analyze duopolistic competition between horizontally differentiated firms selling durable goods or services subject to congestion. At each point of time, new customers buy one unit of the commodity from one of the firms, by comparing present prices and future congestion rates. We study the linear Markov equilibrium of this game which exists and is unique when firms are not too different. The existence of negative consumption externalities is shown to soften the price competition. Moreover, we show that the firm with the larger capacity has, at the steady state, a larger market share, a higher price, and a lower congestion rate. The price of an entrant decreases gradually after entry, while the price of the incumbent rises. The speed of convergence to the steady state is faster, the stronger is the congestion effect. On étudie la concurrence entre deux firmes qui vendent des biens ou des services durables sous la condition d'encombrement. À chaque instant, des clients nouveaux achètent une unité du bien, en comparant les prix et les taux d'encombrement futur. On caractérise l'équilibre markovien de ce jeu. L'existence des externalités négatives rend la concurrence moins féroce. On montre que la firme qui a la plus grande capacité a, dans l'état stationnaire, une plus grande part de marché, un prix plus élevé, et un taux d'encombrement plus faible. Le prix du bien d'une nouvelle firme diminue continuellement, tandis que celui de son rival en exercise monte. La vitesse de convergence est une fonction croissante de l'effet d'encombrement.

Keywords: duopoly; differential games; Markov perfect equilibrium; duopole; jeux différentiels; équilibre markovien parfait (search for similar items in EconPapers)
JEL-codes: C61 D42 D92 H21 L5 (search for similar items in EconPapers)
Date: 2004-02-01
New Economics Papers: this item is included in nep-ind and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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Journal Article: Dynamic duopoly with congestion effects (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:cir:cirwor:2004s-09

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