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Bilateral oligopoly and quantity competition

Alex Dickson () and Roger Hartley

No 2009-52, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)

Abstract: Bilateral oligopoly is a strategic market game with two commodities, allowing strategic behavior on both sides of the market. When the number of buyers is large, such a game approximates a game of quantity competition played by sellers. We present examples which show that this is not typically a Cournot game. Rather, we introduce an alternative game of quantity competition (the market share game) and, appealing to results in the literature on contests, show that this yields the same equilibria as the many-buyer limit of bilateral oligopoly, under standard assumptions on costs and preferences. We also show that the market share and Cournot games have the same equilibria if and only if the price elasticity of the latter is one. These results lead to necessary and sufficient conditions for the Cournot game to be a good approximation to bilateral oligopoly with many buyers and to an ordering of total output when they are not satisfied.

Keywords: Quantity competition; Cournot; strategic foundation; commitment (search for similar items in EconPapers)
Date: 2009
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Journal Article: Bilateral oligopoly and quantity competition (2013) Downloads
Working Paper: Bilateral oligopoly and quantity competition (2009) Downloads
Working Paper: Bilateral oligopoly and quantity competition (2009) Downloads
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