Dynamic Efficiency of Product Market Competition: Cournot versus Bertrand

On the Dynamic Efficiency of Bertrand and Cournot Equilibria

This paper compares Bertrand and Cournot equilibria in a differentiated duopoly with R6D (research and development) competition. It shows that Cournot competition induces more R6D effort than Bertrand competition. However, the price is lower and output is larger in Bertrand than in Cournot competition. Furthermore, the Bertrand equilibrium is more efficient than the Cournot equilibrium if eithe...

Dynamic Bertrand and Cournot competition: Asymptotic and computational analysis of product differentiation

We study continuous time oligopolies in which a small number of firms producing similar goods compete with one another by setting prices or quantities. We study a deterministic version of the problem using an asymptotic expansion of the relevant HJB partial differential equations. We find in this setting that for firms with highly differentiated goods, the type of competition matters little. Fo...

Product Market Competition and Stock Market Efficiency

How does competition in a firm's product market affect the behavior of its stock? We examine this question in a noisy rational expectations economy in which firms operate under monopolistic competition. Production is subject to productivity shocks and requires capital, raised on a perfectly competitive equity market. Investors observe firms' past profits and collect private information about th...

Union Bargaining in an Oligopoly Market with Cournot-Bertrand Competition: Welfare and Policy Implications

We investigate the welfare effect of union activity in a relatively new oligopoly model, the Cournot-Bertrand model, where one firm competes in output (a la Cournot) and the other firm competes in price (a la Bertrand). The Nash equilibrium prices, outputs, and profits are quite diverse in this model, with the competitive advantage going to the Cournot-type competitor. A comparison of the resul...

Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes: a Case with Product Differentiation