IDEAS home Printed from https://ideas.repec.org/p/uct/uconnp/2002-14.html
   My bibliography  Save this paper

A Comparison of Two-Market Bertrand Duopoly and Two-Market Cournot Duopoly

Author

Listed:
  • Vicki Knoblauch

    (University of Connecticut)

Abstract

In a two-market Bertrand duopoly,each of two firms chooses one of two markets and a price in that market. All four choices are made simultaneously. In a two-market Cournot duopoly, the firms choose quantities rather than prices.It is well known that in the one-market case the threat of price undercutting means that Bertrand equilibrium prices and profits will be lower and quantities higher than Cournot equilibrium prices, profits and quantities.We find a quite different consequence of price undercutting in two-market duopoly. In the two-market case the threat of price undercutting means that Bertrand equilibria are in continuous mixed strategies, while every Cournot duopoly has an equilibrium in pure strategies, or in strategies that are pure in each market.

Suggested Citation

  • Vicki Knoblauch, 2002. "A Comparison of Two-Market Bertrand Duopoly and Two-Market Cournot Duopoly," Working papers 2002-14, University of Connecticut, Department of Economics.
    • Handle: RePEc:uct:uconnp:2002-14
    as

    Download full text from publisher

    File URL: https://media.economics.uconn.edu/working/2002-14.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hamilton, Jonathan H. & Thisse, Jacques-Francois & Weskamp, Anita, 1989. "Spatial discrimination : Bertrand vs. Cournot in a model of location choice," Regional Science and Urban Economics, Elsevier, vol. 19(1), pages 87-102, February.
    2. Elberfeld, Walter & Wolfstetter, Elmar, 1999. "A dynamic model of Bertrand competition with entry," International Journal of Industrial Organization, Elsevier, vol. 17(4), pages 513-525, May.
    3. Partha Dasgupta & Eric Maskin, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, I: Theory," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(1), pages 1-26.
    4. Dan Kovenock & Raymond Deneckere & Tom Faith & Beth Allen, 2000. "Capacity precommitment as a barrier to entry: A Bertrand-Edgeworth approach," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 15(3), pages 501-530.
    5. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-1150, September.
    6. Leo K. Simon, 1987. "Games with Discontinuous Payoffs," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(4), pages 569-597.
    7. Maarten Janssen & Eric Rasmusen, 2002. "Bertrand Competition Under Uncertainty," Journal of Industrial Economics, Wiley Blackwell, vol. 50(1), pages 11-21, March.
    8. Gersbach, Hans & Schmutzler, Armin, 1999. "External spillovers, internal spillovers and the geography of production and innovation," Regional Science and Urban Economics, Elsevier, vol. 29(6), pages 679-696, November.
    9. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Raymond J. Deneckere & Dan Kovenock, 1988. "Capacity-Constrained Price Competition When Unit Costs Differ," Discussion Papers 861, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Marie-Laure Cabon-Dhersin & Nicolas Drouhin, 2020. "A general model of price competition with soft capacity constraints," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 70(1), pages 95-120, July.
    3. Mayer, Thierry, 2000. "Spatial Cournot competition and heterogeneous production costs across locations," Regional Science and Urban Economics, Elsevier, vol. 30(3), pages 325-352, May.
    4. Vettas, Nikolaos & Biglaiser, Gary, 2004. "Dynamic Price Competition with Capacity Constraints and Strategic Buyers," CEPR Discussion Papers 4315, C.E.P.R. Discussion Papers.
    5. Allison, Blake A. & Lepore, Jason J., 2014. "Verifying payoff security in the mixed extension of discontinuous games," Journal of Economic Theory, Elsevier, vol. 152(C), pages 291-303.
    6. Myrna Wooders & Ben Zissimos, 2003. "Hotelling Tax Competition," CESifo Working Paper Series 932, CESifo.
    7. Simon Loertscher, 2008. "Market Making Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 56(2), pages 263-289, June.
    8. Drezner, Zvi & Eiselt, H.A., 2024. "Competitive location models: A review," European Journal of Operational Research, Elsevier, vol. 316(1), pages 5-18.
    9. Torbenko, A., 2015. "Linear City Models: Overview and Typology," Journal of the New Economic Association, New Economic Association, vol. 25(1), pages 12-38.
    10. Heidrun Hoppe & Ulrich Lehmann-Grube, 2008. "Price competition in markets with customer testing: the captive customer effect," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 35(3), pages 497-521, June.
    11. Lepore, Jason J., 2012. "Cournot outcomes under Bertrand–Edgeworth competition with demand uncertainty," Journal of Mathematical Economics, Elsevier, vol. 48(3), pages 177-186.
    12. Bagh, Adib, 2010. "Variational convergence: Approximation and existence of equilibria in discontinuous games," Journal of Economic Theory, Elsevier, vol. 145(3), pages 1244-1268, May.
    13. Lepore Jason J, 2009. "Consumer Rationing and the Cournot Outcome," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-46, September.
    14. James J. Anton & Gary Biglaiser & Nikolaos Vettas, 2014. "Dynamic Price Competition With Capacity Constraints And A Strategic Buyer," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(3), pages 943-958, August.
    15. Peralta, Susana & Wauthy, Xavier & van Ypersele, Tanguy, 2006. "Should countries control international profit shifting?," Journal of International Economics, Elsevier, vol. 68(1), pages 24-37, January.
    16. de Frutos, María-Ángeles & Fabra, Natalia, 2011. "Endogenous capacities and price competition: The role of demand uncertainty," International Journal of Industrial Organization, Elsevier, vol. 29(4), pages 399-411, July.
    17. Allison, Blake A. & Bagh, Adib & Lepore, Jason J., 2018. "Sufficient conditions for weak reciprocal upper semi-continuity in mixed extensions of games," Journal of Mathematical Economics, Elsevier, vol. 74(C), pages 99-107.
    18. Prabal Roy Chowdhury, 2004. "Bertrand-Edgeworth duopoly with linear costs: A tale of two paradoxes," Discussion Papers 04-13, Indian Statistical Institute, Delhi.
    19. Becchetti, Leonardo & Palestini, Arsen & Solferino, Nazaria & Elisabetta Tessitore, M., 2014. "The socially responsible choice in a duopolistic market: A dynamic model of “ethical product” differentiation," Economic Modelling, Elsevier, vol. 43(C), pages 114-123.
    20. Liang, Wen-Jung & Tseng, Ching-Chih & Wang, Kuang-Cheng Andy, 2011. "Location choice with delegation: Bertrand vs. Cournot competition," Economic Modelling, Elsevier, vol. 28(4), pages 1774-1781, July.

    More about this item

    Keywords

    Cournot; Bertrand; Two-Market Duopoly;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uct:uconnp:2002-14. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mark McConnel (email available below). General contact details of provider: https://edirc.repec.org/data/deuctus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.