Within a simple model of homogeneous oligopoly, we show that the traditional ranking between Bertrand and Cournot equilibria may be reversed. For price setting entails a continuum of price equilibria under convex variable costs, departure from marginal cost pricing may be observed. As a consequence, Bertrand–Nash equilibrium profits (welfare) may be higher (lower) than Cournot–Nash ones. The reversal of the standard rankings occurs when pricing strategies mimic collusive behaviour.

Bertrand versus Cournot with convex variable costs

DELBONO, FLAVIO;LAMBERTINI, LUCA
2016

Abstract

Within a simple model of homogeneous oligopoly, we show that the traditional ranking between Bertrand and Cournot equilibria may be reversed. For price setting entails a continuum of price equilibria under convex variable costs, departure from marginal cost pricing may be observed. As a consequence, Bertrand–Nash equilibrium profits (welfare) may be higher (lower) than Cournot–Nash ones. The reversal of the standard rankings occurs when pricing strategies mimic collusive behaviour.
Flavio, Delbono; Luca, Lambertini
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/505171
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