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On the Microfoundation of Linear Oligopoly Demand

Author

Listed:
  • Bos, Iwan

    (RS: GSBE Theme Conflict & Cooperation, Organisation,Strategy & Entrepreneurship)

  • Vermeulen, Dries

    (RS: GSBE Theme Data-Driven Decision-Making, RS: GSBE Theme Conflict & Cooperation, QE Operations research)

Abstract

We critically assess the representative consumer model that forms the foundation of a well-known class of linear oligopoly demand structures. It is argued that this approach has several limitations. We present an alternative microeconomic foundation by deriving the same demand system directly from a population of heterogeneous buyers. Our approach can be easily adapted to different demand specifications.

Suggested Citation

  • Bos, Iwan & Vermeulen, Dries, 2019. "On the Microfoundation of Linear Oligopoly Demand," Research Memorandum 004, Maastricht University, Graduate School of Business and Economics (GSBE).
    • Handle: RePEc:unm:umagsb:2019004
    DOI: 10.26481/umagsb.2019004
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    References listed on IDEAS

    as
    1. Jerison, Michael, 1997. "Nonrepresentative representative consumers," UC3M Working papers. Economics 4137, Universidad Carlos III de Madrid. Departamento de Economía.
    2. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
    3. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
    4. Hackner, Jonas, 2000. "A Note on Price and Quantity Competition in Differentiated Oligopolies," Journal of Economic Theory, Elsevier, vol. 93(2), pages 233-239, August.
    5. James E. Hartley, 1996. "Retrospectives: The Origins of the Representative Agent," Journal of Economic Perspectives, American Economic Association, vol. 10(2), pages 169-177, Spring.
    6. Amir, Rabah & Erickson, Philip & Jin, Jim, 2017. "On the microeconomic foundations of linear demand for differentiated products," Journal of Economic Theory, Elsevier, vol. 169(C), pages 641-665.
    7. Michael Kopel & Anna Ressi & Luca Lambertini, 2017. "Capturing Direct and Cross Price Effects in a Differentiated Products Duopoly Model," Manchester School, University of Manchester, vol. 85(3), pages 282-294, June.
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    Cited by:

    1. Soeiro, Renato & Adrego Pinto, Alberto, 2019. "Social power as a solution to the Bertrand Paradox," MPRA Paper 94271, University Library of Munich, Germany.
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    3. Neelanjan Sen & Uday Bhanu Sinha, 2023. "When to merge with a lower quality producer?," Journal of Economics, Springer, vol. 138(2), pages 165-188, March.

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    More about this item

    JEL classification:

    • B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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