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On the efficiency of Bertrand and Cournot equilibrium in the presence of asymmetric network compatibility effects

Author

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  • Tsuyoshi Toshimitsu

    (School of Economics, Kwansei Gakuin University)

Abstract

Based on a differentiated duopoly model, we consider the efficiency of Bertrand and Cournot equilibrium in the presence of network effects and product compatibility. In particular, we demonstrate that if an asymmetric product compatibility with a strong network effect between the firms arises, give certain conditions, Cournot equilibrium is more efficient than Bertrand equilibrium in terms of greater consumer, producer, and social surplus.

Suggested Citation

  • Tsuyoshi Toshimitsu, 2015. "On the efficiency of Bertrand and Cournot equilibrium in the presence of asymmetric network compatibility effects," Discussion Paper Series 129, School of Economics, Kwansei Gakuin University, revised Jun 2015.
    • Handle: RePEc:kgu:wpaper:129
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    File URL: http://192.218.163.163/RePEc/pdf/kgdp129.pdf
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    More about this item

    Keywords

    Bertrand equilibrium; Cournot equilibrium; product compatibility; network effect; fulfilled expectation; horizontally differentiated duopoly;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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