Unrestricted Duopoly Competition: Equilibrium and Survival

Jaideep Roy and Torben Tranaes ()

No 2002-01, CIE Discussion Papers from University of Copenhagen. Department of Economics. Centre for Industrial Economics

Abstract: This paper is inspired by the ever lasting discussions over Bertrand's (1883) price-deviation critique of Cournot's (1838) duopoly analysis. We consider a homogenous good duopoly with constant marginal costs and no capacity constraints, but we allow firms to set either a quantity, a price, or both. We derive two main results. First, this model has two duopoly equilibria, one where firms commit only to prices (Bertrand behavior) and one where they commit only to quantities (Cournot behavior), and it has equilibria supporting a perfect contestable market where one firm supplies the entire market at a price equal to marginal costs. Second, the Cournot behavior is best fit for survival in terms of evolutionary stability. This provides an argument for the existence of quantity-commitment institutions like auctions in oligopolistic markets for homogenous goods.

Keywords: homegenous duopoly; Cournot vs. Bertrand; price and quantity competition (search for similar items in EconPapers)
JEL-codes: A1 D4 L1 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2002-06
New Economics Papers: this item is included in nep-com and nep-ind
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.econ.ku.dk/cie/dp/dp_2000-2002/2002-01.pdf/ (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.econ.ku.dk/cie/dp/dp_2000-2002/2002-01.pdf/ [301 Moved Permanently]--> https://www.econ.ku.dk/cie/dp/dp_2000-2002/2002-01.pdf/)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kud:kuieci:2002-01

Access Statistics for this paper

More papers in CIE Discussion Papers from University of Copenhagen. Department of Economics. Centre for Industrial Economics �ster Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark. Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Hoffmann ().