Book contents
- Frontmatter
- Contents
- Preface
- Part I Introduction
- Part II Background
- Part III Examining Cournot's model
- Part IV Applications
- 12 Cournot and Walras equilibrium
- 13 Duopoly information equilibrium: Cournot and Bertrand
- 14 Information transmission – Cournot and Bertrand equilibria
- 15 Uncertainty resolution, private information aggregation, and the Cournot competitive limit
- 16 Losses from horizontal merger: the effects of an exogenous change in industry structure on Cournot–Nash equilibrium
- 17 Delegation and the theory of the firm
- 18 A study of cartel stability: the Joint Executive Committee, 1880–1886
13 - Duopoly information equilibrium: Cournot and Bertrand
Published online by Cambridge University Press: 07 September 2009
- Frontmatter
- Contents
- Preface
- Part I Introduction
- Part II Background
- Part III Examining Cournot's model
- Part IV Applications
- 12 Cournot and Walras equilibrium
- 13 Duopoly information equilibrium: Cournot and Bertrand
- 14 Information transmission – Cournot and Bertrand equilibria
- 15 Uncertainty resolution, private information aggregation, and the Cournot competitive limit
- 16 Losses from horizontal merger: the effects of an exogenous change in industry structure on Cournot–Nash equilibrium
- 17 Delegation and the theory of the firm
- 18 A study of cartel stability: the Joint Executive Committee, 1880–1886
Summary
In a duopoly model where firms have private information about an uncertain linear demand, it is shown that if the goods are substitutes (not) to share information is a dominant strategy for each firm in Bertrand (Cournot) competition. If the goods are complements the result is reversed. Furthermore the following welfare results are obtained:
(i) With substitutes in Cournot equilibrium the market outcome is never optimal with respect to information sharing but it may be optimal in Bertrand competition if the products are good substitutes. With complements the market outcome is always optimal.
(ii) Bertrand competition is more efficient than Cournot competition.
(iii) The private value of information to the firms is always positive but the social value of information is positive in Cournot and negative in Bertrand competition. Journal of Economic Literature Classification Numbers: 022, 026, 611.
© 1985 Academic Press, Inc.Introduction
Consider a symmetric differentiated duopoly model in which firms have private market data about the uncertain demand. We analyze two types of duopoly information equilibrium, Cournot and Bertrand, which emerge, respectively, from quantity and price competition, and show that the incentives for information sharing and its welfare consequences depend crucially on the type of competition, the nature of the goods (substitutes or complements), and the degree of product differentiation.
The demand structure is linear and symmetric, and allows the goods to be substitutes, independent or complements.
- Type
- Chapter
- Information
- Cournot OligopolyCharacterization and Applications, pp. 317 - 341Publisher: Cambridge University PressPrint publication year: 1989