THE EQUIVALENCE OF BERTRAND EQUILIBRIUM IN A DIFFERENTIATED DUOPOLY AND COURNOT EQUILIBRIUM IN A DIFFERENTIATED OLIGOPOLY

  • DongJoon LEE Nagoya University of Commerce and Business, Japan,
  • Sangheon HAN Nagoya University of Commerce and Business, Japan
  • Yuji ONO Nagoya University of Commerce and Business, Japan
  • Joonghwa OH Nagoya University of Commerce and Business, Japan

Abstract

This paper examines whether Bertrand equilibrium in a differentiated duopoly can be duplicated with Cournot competition or not. We show that the degree of product differentiation plays an important role in the duality between those equilibria. Our main claims are two. One is that there exists a unique duality condition that satisfies the equivalence between Bertrand and Cournot equilibrium irrespectively of market structures. The other is that the number of firms of Cournot competition that satisfies Bertrand equilibrium increases with the degree of product differentiation.

References

[1] Alipranti, M., Milliou, C. and Petrakis, E. 2014. Price vs. Quantity Competition in a Vertically Related Market, Economics Letters, 124: 122-126.
[2] Amir, R., and Jin, J. Y. 2001. Cournot and Bertrand Equilibria Compared: Substitutability, Complementarity and Concavity, International Journal of Industrial Organization, 19: 303-317.
[3] Arya, A., Mittendorf, B., and Sappington, D. E. M. 2008. Outsourcing, Vertical Integration, and Price vs. Quantity Competition, International Journal of Industrial Organization, 26: 1-16.
[4] Chamberlin, E. 1948. The Theory of Monopolistic Competition, Cambridge: Harvard University.
[5] Cheng, L. 1985. Comparing Bertrand and Cournot Equilibria: A Geometric Approach, Rand Journal of Economics, 16: 146-152.
[6] Correa-Lopez, M. 2007. Price and Quantity Competition in a Differentiated Duopoly with Upstream Suppliers, Journal of Economics and Management Strategy, 16: 469-505.
[7] Dastidar, K. G. 1997. Comparing Cournot and Bertrand in a Homogenous Product Market, Journal of Economic Theory, 75: 205-212.
[8] Dixit, A. K. 1979. A Model of Duopoly Suggesting a Theory of Entry Barriers, Bell Journal of Economics, 10: 20-32.
[9] Hackner, J. 2000. A Note on Price and Quantity Competition in Differentiated Oligopolies, Journal of Economic Theory, 93: 233-239.
[10] Lee, D. and Choi, K. Bertrand vs. Cournot Competition with Upstream Firm Investment, Bulletin of Economic Research, forthcoming.
[11] Singh, N., and Vives, X. 1984. Price and Quantity Competition in a Differentiated Duopoly, Rand Journal of Economics, 15: 546 - 554.
Published
2017-07-11
How to Cite
LEE, DongJoon et al. THE EQUIVALENCE OF BERTRAND EQUILIBRIUM IN A DIFFERENTIATED DUOPOLY AND COURNOT EQUILIBRIUM IN A DIFFERENTIATED OLIGOPOLY. Theoretical and Practical Research in the Economic Fields, [S.l.], v. 7, n. 2, p. 146-154, july 2017. ISSN 2068-7710. Available at: <https://journals.aserspublishing.eu/tpref/article/view/1263>. Date accessed: 23 jan. 2022. doi: https://doi.org/10.14505//tpref.v7.2(14).03.