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Generic regularity of differentiated product oligopolies

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  • Michael Zierhut

    (Humboldt University)

Abstract

In oligopoly models with differentiated products, producers face a market demand function that reflects the preferences of consumers. However, typical assumptions on preferences place only weak restrictions on the shape of aggregate demand. This may result in profit functions that are not strictly quasiconcave, in best-reply correspondences that are not differentiable, and in equilibria that are not robust to perturbations. This paper establishes differentiability and robustness as a generic property: for an open, dense set of economies, best replies are differentiable in a neighborhood of equilibria, which is a precondition for comparative statics. All these economies have a finite number of equilibria in pure strategies.

Suggested Citation

  • Michael Zierhut, 2021. "Generic regularity of differentiated product oligopolies," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 71(1), pages 341-374, February.
    • Handle: RePEc:spr:joecth:v:71:y:2021:i:1:d:10.1007_s00199-020-01249-1
    DOI: 10.1007/s00199-020-01249-1
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    More about this item

    Keywords

    Comparative statics; Imperfect competition; Cournot–Walras equilibrium; Regular production economy;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies

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