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On the Relationship Between Quantity Precommitment and Cournot Games

Author

Listed:
  • Amr Farahat

    (Olin Business School, Washington University in St. Louis, St. Louis, Missouri 63130)

  • Woonghee Tim Huh

    (Sauder School of Business, University of British Columbia, Vancouver, British Columbia V6T 1Z2, Canada)

  • Hongmin Li

    (W.P. Carey School of Business, Arizona State University, Tempe, Arizona 85287)

Abstract

We study a two-stage deterministic differentiated-product oligopoly competition game, called the quantity precommitment game, in which firms compete on quantity in the first stage and then compete on price in the second stage. We compare this game with a single-stage Cournot game, in which firms compete on quantity only and prices are set to clear the market. We show that any equilibrium of the quantity precommitment game is an equilibrium of the Cournot game under certain conditions that allow for commonly used demand functions and general spill models. Our approach yields insight into key properties that enable this relationship to hold.

Suggested Citation

  • Amr Farahat & Woonghee Tim Huh & Hongmin Li, 2019. "On the Relationship Between Quantity Precommitment and Cournot Games," Operations Research, INFORMS, vol. 67(1), pages 109-122, January.
    • Handle: RePEc:inm:oropre:v:67:y:2019:i:1:p:109-122
    DOI: 10.1287/opre.2018.1760
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    References listed on IDEAS

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