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Excess Capacity In Post Entry Cournot Competition

Author

Listed:
  • JACQUES THÉPOT

    (Université Louis Pasteur, 61, avenue de la Forêt-Noire, 67070 Strasbourg cedex, France)

Abstract

This paper discusses the occurrence of excess capacity in a post entry duopoly continuous time model when capacity building is irreversible. It is proved that the Cournot–Nash strategies used by firms may induce persistent capacity for the established firm. In the linear demand case, the investment periods of the established firm and the entrant are analytically derived. These results generalize findings of Spulber (1981). A comparative test in terms of rational expectations of quantities is designed to characterize excess capacity occurrence.

Suggested Citation

  • Jacques Thépot, 2002. "Excess Capacity In Post Entry Cournot Competition," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 4(02), pages 101-118.
    • Handle: RePEc:wsi:igtrxx:v:04:y:2002:i:02:n:s0219198902000586
    DOI: 10.1142/S0219198902000586
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    More about this item

    Keywords

    Dynamics duopoly; excess capacity; JEL classification code C73; JEL classification code D43;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C0 - Mathematical and Quantitative Methods - - General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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