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