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Intra-brand competition in a differentiated oligopoly

Author

Listed:
  • Michèle Breton

    (HEC Montréal)

  • Lucia Sbragia

    (Durham University Business School)

Abstract

In this paper we consider a differentiated oligopoly with two product varieties that are supplied by two groups of firms. After computing the Cournot solution of the game, we study its sensitivity to different sources of competition, namely the degree of product substitutability and market composition. Market composition can change either via new firms entering one industry or via firms switching production techniques, thus modifying the intensity of intra-brand competition. After studying the welfare consequences of an intensification of competition, we identify the equilibrium market composition when firms are driven by profit considerations. All the results are expressed in terms of the degree of product substitutability and of what we define “weighted relative efficiency” (WRE), which is a parameter combining both firm characteristics and market conditions.

Suggested Citation

  • Michèle Breton & Lucia Sbragia, 2021. "Intra-brand competition in a differentiated oligopoly," Journal of Economics, Springer, vol. 132(1), pages 1-40, January.
    • Handle: RePEc:kap:jeczfn:v:132:y:2021:i:1:d:10.1007_s00712-020-00712-w
    DOI: 10.1007/s00712-020-00712-w
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    References listed on IDEAS

    as
    1. Saggi, Kamal & Vettas, Nikolaos, 2002. "On intrabrand and interbrand competition: The strategic role of fees and royalties," European Economic Review, Elsevier, vol. 46(1), pages 189-200, January.
    2. Okuguchi, Koji, 1987. "Equilibrium prices in the Bertrand and Cournot oligopolies," Journal of Economic Theory, Elsevier, vol. 42(1), pages 128-139, June.
    3. Piercarlo Zanchettin, 2006. "Differentiated Duopoly with Asymmetric Costs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(4), pages 999-1015, December.
    4. Amir, Rabah & Jin, Jim Y., 2001. "Cournot and Bertrand equilibria compared: substitutability, complementarity and concavity," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 303-317, March.
    5. Akio Kawasaki & Takao Ohkawa & Makoto Okamura, 2019. "Inter-group competition through joint marketing efforts and intra-group Cournot competition," Journal of Economics, Springer, vol. 128(3), pages 203-224, December.
    6. 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.
    7. Vives, Xavier, 1985. "On the efficiency of Bertrand and Cournot equilibria with product differentation," Journal of Economic Theory, Elsevier, vol. 36(1), pages 166-175, June.
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    Cited by:

    1. 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.
    2. Neelanjan Sen & Saumya Kaul & Rajit Biswas, 2021. "Technology licensing under product differentiation," Journal of Economics, Springer, vol. 134(3), pages 219-260, December.

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    More about this item

    Keywords

    Differentiated oligopoly; Cournot solution; Intra-brand competition; Equilibrium;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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