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Cournot duopoly when the competitors operate multiple production plants
Facoltà di Economia, Università degli Studi di Urbino, Urbino, Italy.
Facoltà di Economia, Università degli Studi di Urbino, Urbino, Italy.
Umeå University, Faculty of Social Sciences, Centre for Regional Science (CERUM).
2009 (English)In: Journal of Economic Dynamics and Control, ISSN 0165-1889, E-ISSN 1879-1743, Vol. 33, no 1, 250-265 p.Article in journal (Refereed) Published
Abstract [en]

This article considers a Cournot duopoly under an isoelastic demand function and cost functions with built-in capacity limits. The special feature is that each firm is assumed to operate multiple plants, which can be run alone or in combination. Each firm has two plants with different capacity limits, so each has three cost options, the third being to run both plants, dividing the load according to the principle of equal marginal costs. As a consequence, the marginal cost functions come in three disjoint pieces, so the reaction functions, derived on basis of global profit maximization, may also consist of disjoint pieces. This is reflected in a particular bifurcation structure, due to border-collision bifurcations and to particular basin boundaries, related to the discontinuities. It is shown that stable cycles may coexist, and the non-existence of unstable cycles constitutes a new property. We also compare the coexistent short periodic solutions in terms of the resulting real profits.

Place, publisher, year, edition, pages
2009. Vol. 33, no 1, 250-265 p.
Keyword [en]
Duopoly, Capacity limits, Border-collision bifurcations, Discontinuous reaction functions
National Category
Economics
Identifiers
URN: urn:nbn:se:umu:diva-100239OAI: oai:DiVA.org:umu-100239DiVA: diva2:790939
Available from: 2015-02-26 Created: 2015-02-26 Last updated: 2017-12-04

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http://www.sciencedirect.com/science/article/pii/S0165188908001000
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Centre for Regional Science (CERUM)
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Journal of Economic Dynamics and Control
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CiteExportLink to record
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