Endogenous Horizontal Product Differentiation Under Bertrand And Cournot Competition
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Endogenous Horizontal Product Differentiation Under Bertrand And Cournot Competition
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Author : James A. Brander
language : en
Publisher:
Release Date : 2015
Endogenous Horizontal Product Differentiation Under Bertrand And Cournot Competition written by James A. Brander and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with Competition categories.
This paper provides a new and simple model of endogenous horizontal product differentiation based on a standard demand structure derived from quadratic utility. One objective of the paper is to explain the "empirical Bertrand paradox" - the failure to observe homogeneous product Bertrand oligopoly, while homogeneous product Cournot oligopoly has significant empirical relevance. In our model firms invest in product differentiation if differentiation investments are sufficiently effective (i.e. if differentiation is not too costly). The threshold level of differentiation effectiveness needed to induce such investments is an order of magnitude less for Bertrand firms than for Cournot firms. Thus there is a wide range over which Bertrand firms differentiate their products but Cournot firms do not. If Cournot firms do choose to differentiate their products, corresponding Bertrand firms always differentiate more. We also establish the important insight that if product differentiation is endogenous Bertrand firms may charge higher prices and earn higher profits than corresponding Cournot firms, in contrast to the general presumption that Bertrand behavior is more competitive than Cournot behavior. Interestingly, consumer surplus increases with differentiation in the Cournot model but, due to sharply increasing prices, decreases with differentiation in the Bertrand model.
Intra Industry Trade With Bertrand And Cournot Oligopoly
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Author : James A. Brander
language : en
Publisher:
Release Date : 2015
Intra Industry Trade With Bertrand And Cournot Oligopoly written by James A. Brander and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with Competition categories.
This paper investigates the effect of endogenous horizontal product differentiation on trade patterns and the gains from trade under Bertrand and Cournot oligopoly. Firms differentiate their products to mitigate competition, but only if the investment required is not too high. Investment in product differentiation takes place in a much wider range of cases and results in a greater difference between products under Bertrand than Cournot competition. In our model, trade in homogeneous products never takes place under Bertrand competition: Bertrand firms export only if they differentiate their products. Cournot firms may trade in either homogeneous or differentiated products. If there is trade, consumers tend to be better off with Bertrand than Cournot competition due to greater product differentiation and more aggressive pricing, but higher levels of investment can raise Bertrand profit above Cournot profit and also above the monopoly profit at autarky when investment costs are sufficiently low.
Quantity Precommitment And Bertrand Competition Yield Cournot Outcomes
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Author : Xiangkang Yin
language : en
Publisher:
Release Date : 2011
Quantity Precommitment And Bertrand Competition Yield Cournot Outcomes written by Xiangkang Yin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
Using a simple model of two-stage duopoly game, this paper shows that Bertrand-like price competition on a differentiated goods market, following a simultaneous endogenous choice of production capacity, yields the Cournot-like outcomes.
The Economic Theory Of Product Differentiation
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Author : John Beath
language : en
Publisher: Cambridge University Press
Release Date : 1991-02-22
The Economic Theory Of Product Differentiation written by John Beath and has been published by Cambridge University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 1991-02-22 with Business & Economics categories.
There are few industries in modern market economies that do not manufacture differentiated products. This book provides a systematic explanation and analysis of the widespread prevalence of this important category of products. The authors concentrate on models in which product selection is endogenous. In the first four chapters they consider models that try to predict the level of product differentiation that would emerge in situations of market equilibrium. These market equilibria with differentiated products are characterised and then compared with social welfare optima. Particular attention is paid to the distinction between horizontal and vertical differentiation as well as to the related issues of product quality and durability. This book brings together the most important theoretical contributions to these topics in a succinct and coherent manner. One of its major strengths is the way in which it carefully sets out the basic intuition behind the formal results. It will be useful to advanced undergraduate and graduate students taking courses in industrial economics and microeconomic theory.
Quantity Precommitment And Bertrand Competition Yield Cournot Outcomes
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Author : Xiangkang Yin
language : en
Publisher:
Release Date : 1995
Quantity Precommitment And Bertrand Competition Yield Cournot Outcomes written by Xiangkang Yin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995 with Competition categories.
Product Differentiation In A Market With Endogenous Sequential Entry
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Author : Walter James Lane
language : en
Publisher:
Release Date : 1978
Product Differentiation In A Market With Endogenous Sequential Entry written by Walter James Lane and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1978 with Industrial location categories.
Product Differentiation And Endogenous Mode Of Competition
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Author : Massimo Motta
language : en
Publisher:
Release Date : 1998
Product Differentiation And Endogenous Mode Of Competition written by Massimo Motta and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998 with categories.
Vertical Differentiation Trade And Endogenous Common Standards
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Author :
language : en
Publisher:
Release Date : 1998
Vertical Differentiation Trade And Endogenous Common Standards written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998 with categories.
Different market settings are considered in a free trade environment, where firms can choose technology, quality, and price or quantity. The shape of competition in prices requires the intervention of governments, via a common antidumping policy, to make firms converge on the simultaneous equilibrium which is socially optimal. In the Cournot framework, the equilibria we obtain impinge upon the kind of precommitments undertaken by firms. The coincidence between firms' behaviour and social preference obtains either when competition is tough, since income is low, or when firms must compete in quantities in the market stage, since they cannot modify qualities. The spontaneous coordination over common standards has to be contrasted with both the case of a2uent consumers and Bertrand competition.
An Exposition On The Horizontally Differentiated Products Bertrand Model
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Author : Evan Moore
language : en
Publisher:
Release Date : 2006
An Exposition On The Horizontally Differentiated Products Bertrand Model written by Evan Moore and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.
Students, in their roles as consumers, are usually more familiar with price competition than with quantity competition. Unfortunately, the Bertrand pricing model is usually given short shrift, relative to the Cournot model, both in the classroom and in textbooks. The richness of the Bertrand model should not be underestimated. We show how the standard textbook parameterization can be used, both analytically and graphically, in determining how variations in product differentiation can affect equilibrium prices and profits. We also show that some of the standard assumptions used in both textbooks and in research are unnecessarily strong. Additionally, we mention the role of advertising and its effects on pricing and profitability as well. The findings are useful in presenting and discussing the Bertrand model in the classroom.
Evolution Of Competitive Equilibrium With Endogenous Product Differentiation
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Author : Toshihiro Matsumura
language : en
Publisher:
Release Date : 2013
Evolution Of Competitive Equilibrium With Endogenous Product Differentiation written by Toshihiro Matsumura and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
Previous theoretical researches show that learning from good performers yields intense competition and results in the low profitability of firms. These researchers do not take into account differentiation strategies being referred as a useful strategic tool to mitigate competition. We introduce an evolutionary (learning) game into a duopoly model with product differentiation on the Hotelling line. We find that central agglomeration appears in the unique stochastically stable state in which the equilibrium price is equal to the marginal cost of firms. This implies that perfectly competitive equilibrium appears even when firms have an opportunity to differentiate themselves through product differentiation and to mitigate competition.