Comparing Cournot and Bertrand in a Homogeneous Product Market

Abstract

This paper reexamines some general notions regarding the comparison of Cournot and Bertrand equilibrium outcomes. It recasts the Vives (1985) result in a homogeneous product framework and it is shown that the prevailing notion that Bertrand equilibrium involves lower prices and profits than a Cournot equilibrium is not always true, especially when costs are asymmetric.] 1 I am indebted to Anjan Mukherji for :.is paper.

Price vs. quantity competition in a vertically related market

“…10 In particular, solving (12), …rst under downstream Cournot competition, we obtain the equilibrium wholesale prices:…”

“…A substantial body of the literature (see e.g., For instance, Cheng (1985) and Vives (1985) generalized these results respectively by means of a geographic approach and by considering the n-…rm oligopoly case with general demand functions. Dastidar (1997) and Häckner (2000), instead, pointed out the sensitivity of the results in Singh and Vives to the sharing rules governing oligopoly and to the type of product di¤erentiation. 1 We demonstrate that the standard conclusions about price and quantity competition can be altered in the context of a vertically related market.…”

The Cournot–Bertrand profit differential: A reversal result in a differentiated duopoly with wage bargaining

“…Dastidar (1997) shows that in a homogeneous product market the results are sensitive to the sharing rule and are not necessarily valid under asymmetric costs. In the standard model, costs are both symmetric and exogenous.…”

Comparing Bertrand and Cournot Outcomes in the Presence of Public Firms

“…Subsequently, exploiting cost asymmetries, Dastidar [6], Qiu [17], Häckner [12], and Amir and Jin [1] have provided important counterexamples where at least one of these conclusions fails to hold. To date, however, the literature comparing Bertrand and Cournot outcomes has focused almost exclusively on environments where all firms maximize profits.…”