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MARKET MAKING OLIGOPOLY *
Author(s) -
LOERTSCHER SIMON
Publication year - 2008
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/j.1467-6451.2008.00341.x
Subject(s) - cournot competition , oligopoly , bertrand competition , outcome (game theory) , microeconomics , economics , competition (biology) , bertrand paradox (economics) , ex ante , set (abstract data type) , market structure , market share , industrial organization , computer science , ecology , macroeconomics , finance , programming language , biology
This paper analyzes price competition between market makers who set costly capacity constraints before they intermediate between producers and consumers. The unique equilibrium outcome with pure strategies at the capacity stage is the Cournot outcome. The paper thus provides a rationale for Cournot‐type competition between market makers. This contrasts with previous findings in the literature, where due to the absence of capacity constraints that are set ex ante the Bertrand result typically obtains.