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Consumer Rationing and the Cournot Outcome

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  • Lepore Jason J

    (California Polytechnic State University - San Luis Obispo, jlepore@calpoly.edu)

Abstract

For a symmetric two-stage game, where firms first choose capacities, then compete in prices, Kreps and Scheinkman (Bell Journal of Economics, 1983, 14(2), pp. 326-337) prove that under efficient rationing the Nash equilibrium coincides with the Cournot equilibrium. We extend the model to include asymmetric costs and provide new results showing that the capacity choice game is dominance-solvable, just like the Cournot game. Further, we provide a simple sufficient condition, under which the dominance-solvable result extends to proportional rationing. The results provide new insights into the robustness of Cournot coincidence under alternate demand rationing schemes.

Suggested Citation

  • Lepore Jason J, 2009. "Consumer Rationing and the Cournot Outcome," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-46, September.
    • Handle: RePEc:bpj:bejtec:v:9:y:2009:i:1:n:28
    DOI: 10.2202/1935-1704.1497
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    References listed on IDEAS

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    Cited by:

    1. Wu, Xin-wang & Zhu, Quan-tao & Sun, Laixiang, 2012. "On equivalence between Cournot competition and the Kreps–Scheinkman game," International Journal of Industrial Organization, Elsevier, vol. 30(1), pages 116-125.
    2. Jacobs, Martin, 2016. "Number of firms, rationing, matching, and knowledge: A comprehensive study of variations in experimental Kreps-Scheinkman markets," Economics Working Papers 2016-02, Christian-Albrechts-University of Kiel, Department of Economics.
    3. Lepore, Jason J., 2012. "Cournot outcomes under Bertrand–Edgeworth competition with demand uncertainty," Journal of Mathematical Economics, Elsevier, vol. 48(3), pages 177-186.
    4. Allison, Blake A. & Lepore, Jason J., 2014. "Verifying payoff security in the mixed extension of discontinuous games," Journal of Economic Theory, Elsevier, vol. 152(C), pages 291-303.
    5. Jason J. Lepore & Aric P. Shafran, 2013. "Consumer Rationing and Cournot Outcomes: Experimental Evidence," Southern Economic Journal, John Wiley & Sons, vol. 79(3), pages 727-746, January.

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