On the relationship between quantity precommitment and Cournot games

Amr Farahat, Woonghee Tim Huh, Hongmin Li

Research output: Contribution to journalArticle

Abstract

We study a two-stage deterministic differentiated-product oligopoly competition game, called the quantity precommitment game, in which firms compete on quantity in the first stage and then compete on price in the second stage. We compare this game with a single-stage Cournot game, in which firms compete on quantity only and prices are set to clear the market. We show that any equilibrium of the quantity precommitment game is an equilibrium of the Cournot game under certain conditions that allow for commonly used demand functions and general spill models. Our approach yields insight into key properties that enable this relationship to hold.

Original languageEnglish (US)
Pages (from-to)109-122
Number of pages14
JournalOperations Research
Volume67
Issue number1
DOIs
StatePublished - Jan 1 2019

Fingerprint

Hazardous materials spills
Precommitment
Cournot game

Keywords

  • Competition
  • Differentiated products
  • Pricing
  • Quantity and capacity decisions
  • Spill effects
  • Substitution

ASJC Scopus subject areas

  • Computer Science Applications
  • Management Science and Operations Research

Cite this

On the relationship between quantity precommitment and Cournot games. / Farahat, Amr; Huh, Woonghee Tim; Li, Hongmin.

In: Operations Research, Vol. 67, No. 1, 01.01.2019, p. 109-122.

Research output: Contribution to journalArticle

Farahat, Amr ; Huh, Woonghee Tim ; Li, Hongmin. / On the relationship between quantity precommitment and Cournot games. In: Operations Research. 2019 ; Vol. 67, No. 1. pp. 109-122.
@article{b5816e4cb8194c4aae9c7080722ad51e,
title = "On the relationship between quantity precommitment and Cournot games",
abstract = "We study a two-stage deterministic differentiated-product oligopoly competition game, called the quantity precommitment game, in which firms compete on quantity in the first stage and then compete on price in the second stage. We compare this game with a single-stage Cournot game, in which firms compete on quantity only and prices are set to clear the market. We show that any equilibrium of the quantity precommitment game is an equilibrium of the Cournot game under certain conditions that allow for commonly used demand functions and general spill models. Our approach yields insight into key properties that enable this relationship to hold.",
keywords = "Competition, Differentiated products, Pricing, Quantity and capacity decisions, Spill effects, Substitution",
author = "Amr Farahat and Huh, {Woonghee Tim} and Hongmin Li",
year = "2019",
month = "1",
day = "1",
doi = "10.1287/opre.2018.1760",
language = "English (US)",
volume = "67",
pages = "109--122",
journal = "Operations Research",
issn = "0030-364X",
publisher = "INFORMS Inst.for Operations Res.and the Management Sciences",
number = "1",

}

TY - JOUR

T1 - On the relationship between quantity precommitment and Cournot games

AU - Farahat, Amr

AU - Huh, Woonghee Tim

AU - Li, Hongmin

PY - 2019/1/1

Y1 - 2019/1/1

N2 - We study a two-stage deterministic differentiated-product oligopoly competition game, called the quantity precommitment game, in which firms compete on quantity in the first stage and then compete on price in the second stage. We compare this game with a single-stage Cournot game, in which firms compete on quantity only and prices are set to clear the market. We show that any equilibrium of the quantity precommitment game is an equilibrium of the Cournot game under certain conditions that allow for commonly used demand functions and general spill models. Our approach yields insight into key properties that enable this relationship to hold.

AB - We study a two-stage deterministic differentiated-product oligopoly competition game, called the quantity precommitment game, in which firms compete on quantity in the first stage and then compete on price in the second stage. We compare this game with a single-stage Cournot game, in which firms compete on quantity only and prices are set to clear the market. We show that any equilibrium of the quantity precommitment game is an equilibrium of the Cournot game under certain conditions that allow for commonly used demand functions and general spill models. Our approach yields insight into key properties that enable this relationship to hold.

KW - Competition

KW - Differentiated products

KW - Pricing

KW - Quantity and capacity decisions

KW - Spill effects

KW - Substitution

UR - http://www.scopus.com/inward/record.url?scp=85062088357&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85062088357&partnerID=8YFLogxK

U2 - 10.1287/opre.2018.1760

DO - 10.1287/opre.2018.1760

M3 - Article

VL - 67

SP - 109

EP - 122

JO - Operations Research

JF - Operations Research

SN - 0030-364X

IS - 1

ER -