The Cournot outcome as the result of price competition
Pre-print, Working paper: In a homogeneous product duopoly with concave revenue and convex costs we study a two stage game in which, first, firms engage simultaneously in capacity (production) and, after production levels are made public, there is sequential price competition in the second stage. Randomizing the order of play in the price subgame, we can find: (i) that the Cournot outcome can be sustained as a pure strategy subgame perfect Nash equilibrium (SPNE) of the whole game, (ii) a SPNE in which firms produce strictly more than the Cournot outcome.
Keywords JEL
Keywords
- Subgame perfect Nash equilibrium
- Price
- Quantity
- Pure strategies
- Cournot
Internal reference
- PSE Working Papers n°2007-24
URL of the HAL notice
Version
- 1