Bilateral oligopoly and quantity competition

Alex Dickson () and Roger Hartley ()
Additional contact information
Roger Hartley: Department of Economics, University of Manchester

No 922, Working Papers from University of Strathclyde Business School, Department of Economics

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 su¢ cient 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; commitmen (search for similar items in EconPapers)
JEL-codes: C72 D21 D43 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2009-10
New Economics Papers: this item is included in nep-com, nep-gth and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Bilateral oligopoly and quantity competition (2013)
Working Paper: Bilateral oligopoly and quantity competition (2009)
Working Paper: Bilateral oligopoly and quantity competition (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:str:wpaper:0922

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