Search results for "Cournot"
showing 10 items of 19 documents
Stackelberg-Cournot and Cournot equilibria in a mixed markets exchange economy
2012
In this note, we compare two strategic general equilibrium concepts: the Stackelberg-Cournot equilibrium and the Cournot equilibrium. We thus consider a market exchange economy including atoms and a continuum of traders, who behave strategically. We show that, when the preferences of the small traders are represented by Cobb-Douglas utility functions and the atoms have the same utility functions and endowments, the Stackelberg-Cournot and the Cournot equilibrium equilibria coincide if and only if the followers’ best responses functions have a zero slope at the SCE.
More firms, more competition? The case of the fourth operator in France's mobile phone market
2010
Accepted, Forthcoming; International audience; To foster competition the French government authorized a fourth operator, ‘Free', to enter the country's mobile phone market at the end of 2009 alongside Orange, SFR and Bouygues Telecom (BT), who held respectively one-half, one-third and one-sixth of the market. By using a stylized model of France's phone market, we have examined what we call the regulator's nightmares and dreams. If Cournot competition is in place before Free's entry, minimizing the total profit fails to maximize the consumer surplus and the total surplus; the maximum most realistic price fall is 6.7% compared to three-way competition and could be 1.7% only; if Orange, SFR an…
Competing R&D Joint Ventures in Cournot oligopoly with spillovers
2014
This paper considers competition between R&D cartels, whereby prospective Cournot competitors coordinate their R&D decisions in order to maximize joint profit. It studies how R&D activity, aggregate profit, consumer surplus, and social welfare vary as the number of competing cartels varies. It also compares equilibrium with second best R&D, and discusses the policy implications of the results. The results show that the effects of R&D cartel competition depend on the welfare criterion adopted and on whether there are cooperative synergies or not.
ENDOGENOUS TIMING WITH FREE ENTRY
2006
A free entry model with linear costs is considered where firms first choose their entry time and then compete in the market according to the resulting timing decisions. Multiple equilibria arise allowing for infinitely many industry output configurations encompassing one limit-output dominant firm and the Cournot equilibrium with free entry as extreme cases. Sequential entry is never observed. Both Stackelberg and Cournot-like outcomes are sustainable as equilibria however. When the number of incumbents is given, entry is always prevented, and industry output is sometimes larger than the entry preventing level.
Bilateral Monopoly: A Contribution by Francesco Ferrara
2009
In this paper, we propose an interpretation of the application of "cost of reproduction" of Francesco Ferrara to the exchange between two agents to highlight its relevance for the theory of bilateral monopoly. In the Teoria delle Mercedi (1863), Ferrara gives a numerical example to explain price determination in the exchange between one buyer and one seller. Here, this example is translated into a mathematical model that reproduces the fundamental issues of the neoclassical debate on the indeterminacy of price in the Cournot model (1938), and anticipates the solutions proposed by Edgeworth (1881) at the end of this debate.
Stackelberg-Walras and Cournot-Walras equilibria in mixed markets: a comparison
2012
In this note, we compare two strategic general equilibrium concepts: the Stackelberg-Walras equilibrium and the Cournot-Walras equilibrium. We thus consider a market exchange economy embodying atoms and a continuum of traders. It is shown that, when the preferences of the small traders are represented by Cobb-Douglas utility functions, the Stackel-berg-Walras and the Cournot-Walras equilibria can coincide only if 1) the endowments and preferences of atoms are identical and 2) the elasticity of the followers’ best response functions are equal to zero in equilibrium.
Is the French mobile phone cartel really a cartel?
2009
International audience; France Telecom (FT), SFR and Bouygues Telecom (BT) have been fined by France's Conseil de la Concurrence (CC) for organizing a mobile phone cartel with stable market shares (one-half, one-third and one-sixth, respectively) and for directly exchanging commercial information. While not contesting the legal decision, it is argued here that the economic reasoning is flawed. (1) As the CC made much of the firms' stable market shares, we have first followed this line of reasoning by considering that the market shares are quotas under uniform costs. Even if there is a general incentive to form a monopolistic cartel, BT was too small for it to be worth its while to join it; it i…
Allocating cost reducing investments over competing divisions
2007
This paper examines a three-stage model of divisionalization where, first, two parent firms create independent units, second, the parent firms allocate cost reduction levels over these units, and third, the resulting units compete in a Cournot market given their current costs of production. The introduction of the cost reduction phase is shown to reduce the incentives toward divisionalization severely, relative to other existing models. Namely, the scope for divisionalization in equilibrium reduces as the marginal cost of the cost reducing investment decreases, and eventually vanishes. A second-best welfare analysis shows that, for any given market structure, the equilibrium investment deci…
Endogenous timing with infinitely many firms
2008
Abstract A model with constant marginal costs is considered where firms choose first a period for production and then the amount to produce when competing in the market according to the resulting timing decisions. Multiple equilibria arise allowing for infinitely many industry output configurations encompassing one limit-output dominant firm and the Cournot equilibrium with free entry as extreme cases. At each of these equilibria a firm produces a positive amount only if this firm commits to produce at period one. Both Stackelberg and Cournot-like outcomes are sustainable as equilibria however. When the number of leaders is given, production at subsequent periods is always prevented, and in…
Stackelberg equilibrium with multiple firms and setup costs
2017
Abstract I provide conditions that guarantee that a Stackelberg game with a setup cost and an integer number of identical leaders and followers has an equilibrium in pure strategies. The main feature of the game is that when the marginal follower leaves the market the price jumps up, so that a leader’s payoff is neither continuous nor quasiconcave. To show existence I check that a leader’s value function satisfies the following single crossing condition: When the other leaders produce more the leader never accommodates entry of more followers. If demand is strictly logconcave, and if marginal costs are both non decreasing and not flatter than average costs, then a Stackelberg equilibrium ex…