The Cournot outcome as the result of price competition

Pedro Jara-Moroni

PSE Working Papers from HAL

Abstract: In a homogeneous product duopoly with concave revenue and convex costs we study a two stage game in which, first, firms engage simultaneously in capacity (production) and, after production levels are made public, there is sequential price competition in the second stage. Randomizing the order of play in the price subgame, we can find: (i) that the Cournot outcome can be sustained as a pure strategy subgame perfect Nash equilibrium (SPNE) of the whole game, (ii) a SPNE in which firms produce strictly more than the Cournot outcome.

Keywords: subgame perfect Nash equilibrium; price; quantity; pure strategies; Cournot (search for similar items in EconPapers)
Date: 2008-05
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00587866v1
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Working Paper: The Cournot outcome as the result of price competition (2008)
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