Coalition-proof supply function equilibria under capacity constraints

Juan Delgado

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: Whereas in the absence of capacity constraints the Cournot outcome is the unique coalition-proof supply function equilibrium outcome, the presence of capacity constraints may enlarge the set of equilibrium outcomes. Interestingly, if capacities are sufficiently asymmetric the new equilibrium prices are below the Cournot price. These results have important implications for merger and privatization policies: specifically, capacity divestiture will not necessarily imply lower market prices.

Date: 2005-04
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Journal Article: Coalition-proof supply function equilibria under capacity constraints (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:we052314

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