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Pre‐emptive production and market competitiveness in oligopoly with private information
Author(s) -
Amemiya Yuki,
Ishihara Akifumi,
Nakamura Tomoya
Publication year - 2020
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/jems.12410
Subject(s) - cournot competition , stackelberg competition , duopoly , microeconomics , oligopoly , production (economics) , private information retrieval , competition (biology) , competitor analysis , economics , economic surplus , industrial organization , market economy , welfare , ecology , statistics , mathematics , management , biology
Abstract We investigate a firm's pre‐emptive behavior by comparing Cournot competition and Stackelberg games with one leader and multiple followers, where each firm has access to private information on stochastic demand. We show that the firm prefers pre‐emptive quantity choice (Stackelberg leader) to simultaneous quantity choice (Cournot firm) if and only if the firm is ignorant of the market size compared to the other firm. The firm's decision in terms of production timing is always detrimental to producer surplus in the industry. It is beneficial to consumer surplus in duopoly competition, but detrimental when there are many competitors in the market.