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Cournot–Bertrand endogenous behavior in a differentiated oligopoly with entry deterrence

Author

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  • Duarte Brito

    (NOVA School of Science and Technology
    Universidade NOVA de Lisboa)

  • Margarida Catalão-Lopes

    (Universidade de Lisboa)

Abstract

This paper presents a new theoretical justification for the Cournot–Bertrand model to arise in equilibrium when firms have, at the outset, the same cost structure and sell symmetrically differentiated products. The Cournot–Bertrand model assumes some firms compete on price, adjusting their production to meet demand, while others set quantities and let their price adjust until market equilibrium is reached. We show that this may occur endogenously due to the possibility of entry, which may be deterred when some of the incumbents decide to set prices, while others free ride on this behavior and choose quantities.

Suggested Citation

  • Duarte Brito & Margarida Catalão-Lopes, 2023. "Cournot–Bertrand endogenous behavior in a differentiated oligopoly with entry deterrence," Theory and Decision, Springer, vol. 95(1), pages 55-78, July.
    • Handle: RePEc:kap:theord:v:95:y:2023:i:1:d:10.1007_s11238-022-09909-5
    DOI: 10.1007/s11238-022-09909-5
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    References listed on IDEAS

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    More about this item

    Keywords

    Cournot–Bertrand oligopoly; Entry deterrence; Product differentiation;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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