Cournot and Bertrand Equilibria Compared: Substitutability, Complementarity and Concavity

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    Abstract

    This paper assesses the view that Bertrand equilibrium is intrinsically more competitive than Cournot equilibrium. We consider an oligopoly model with linear demand, and a mixture of substitute and complementary products. Our results provide support for the conventional wisdom, and also indicate its limitations. We provide counter-examples showing that no clear-cut comparison of prices and quantities is possible without strategic complementarity in either of the two games. However, price competition is indeed more competitive according to the following criteria: lower mark-up/output ratios, larger average output, and lower average price. (C) 2001 Elsevier Science B.V. All rights reserved.

    Original languageEnglish
    Pages (from-to)303-317
    Number of pages15
    JournalInternational Journal of Industrial Organization
    Volume19
    Issue number3
    DOIs
    Publication statusPublished - Mar 2001

    Keywords

    • mixed-products oligopoly
    • competitiveness criteria
    • STRATEGIC COMPLEMENTARITIES
    • COMPETITION
    • GAMES

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