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On the properties of linear supply functions in oligopoly

Author

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  • Delbono, Flavio
  • Lambertini, Luca

Abstract

In this note we revisit the result by Menezes and Quiggin (2012), showing that under linear supply function competition, the same Nash equilibrium results when firms choose slopes or intercepts of their supply functions. This is because the first order conditions emerging in the two strategy spaces are not linearly independent.

Suggested Citation

  • Delbono, Flavio & Lambertini, Luca, 2015. "On the properties of linear supply functions in oligopoly," Economics Letters, Elsevier, vol. 136(C), pages 22-24.
    • Handle: RePEc:eee:ecolet:v:136:y:2015:i:c:p:22-24
    DOI: 10.1016/j.econlet.2015.08.027
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    References listed on IDEAS

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    1. Menezes, Flavio M. & Quiggin, John, 2012. "More competitors or more competition? Market concentration and the intensity of competition," Economics Letters, Elsevier, vol. 117(3), pages 712-714.
    2. Klemperer, Paul D & Meyer, Margaret A, 1989. "Supply Function Equilibria in Oligopoly under Uncertainty," Econometrica, Econometric Society, vol. 57(6), pages 1243-1277, November.
    3. Ciarreta, Aitor & Gutierrez-Hita, Carlos, 2006. "Supply function vs. quantity competition in supergames," International Journal of Industrial Organization, Elsevier, vol. 24(4), pages 773-783, July.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Denis Claude & Mabel Tidball, 2022. "Taking firms’ margin targets seriously in a model of competition in supply functions," Working Papers hal-03548797, HAL.
    2. Carlos, Gutiérrez-Hita & Vicente-Pérez, José, 2018. "On Supply Function Equilibria in a Mixed Duopoly," QM&ET Working Papers 18-1, University of Alicante, D. Quantitative Methods and Economic Theory.
    3. Keita Yamane, 2018. "Mixed duopoly and the indirect effect in linear supply function competition," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 45(4), pages 519-532, December.
    4. Delbono, Flavio & Lambertini, Luca, 2016. "Ranking Bertrand, Cournot and supply function equilibria in oligopoly," Energy Economics, Elsevier, vol. 60(C), pages 73-78.
    5. Marc Escrihuela‐Villar & Carlos Gutiérrez‐Hita & José Vicente‐Pérez, 2020. "Supply function competition in a mixed electric power market," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(4), pages 1151-1175, August.
    6. Gutiérrez-Hita, Carlos & Vicente-Pérez, José, 2018. "On supply function competition in a mixed oligopoly," MPRA Paper 83792, University Library of Munich, Germany.
    7. Delbono, Flavio & Lambertini, Luca, 2018. "Choosing roles under supply function competition," Energy Economics, Elsevier, vol. 71(C), pages 83-88.
    8. Flavio M. Menezes & John Quiggin, 2020. "The Strategic Industry Supply Curve," Journal of Industrial Economics, Wiley Blackwell, vol. 68(3), pages 523-555, September.
    9. Gutiérrez-Hita, Carlos & Vicente-Pérez, José, 2018. "On supply function equilibria in a mixed duopoly," Economics Letters, Elsevier, vol. 168(C), pages 6-9.
    10. Keita Yamane, 2020. "Market Structure, Competition, and Optimal Privatization: a Linear Supply Function Approach," Journal of Industry, Competition and Trade, Springer, vol. 20(3), pages 605-615, September.
    11. Yusuke Ikuta, 2017. "Linear Supply Function Competition in A Vertically Related Market," International Journal of Economic Policy Studies, Springer, vol. 12(1), pages 1-22, January.

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    More about this item

    Keywords

    Supply function; Linear independence; Residual demand;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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