Capacity precommitment and price competition
نویسنده
چکیده
We introduce a simple model of oligopolistic competition where firms first build capacity, and then, after observing the capacity decisions, choose a reservation price at which they are willing to supply their capacities. This model describes many markets more realistically than Kreps and Scheinkman’s (1983) model. We show that in this new model every pure strategy equilibrium yields the Cournot outcome, and that the Cournot outcome can be sustained by a pure strategy subgame perfect equilibrium. ∗Financial support from the Comisión Nacional del Sistema Eléctrico and the Ministerio de Ciencia y Tecnología, grant SEC2001-0973, is gratefully acknowledged.
منابع مشابه
Capacity precommitment and price competition yield the Cournot outcome
We introduce a simple model of oligopolistic competition where firms first build capacity, and then, after observing the capacity decisions, choose a reservation price at which they are willing to supply their capacities. This model describes many markets more realistically than the model of Kreps and Scheinkman [Kreps, D., Scheinkman, J., 1983. Quantity precommitment and Bertrand competition y...
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