ENDOGENOUS TIMING AND STRATEGIC CHOICE: THE COURNOT-BERTRAND MODEL

Authors


  • The authors would like to thank Klaus Zauner and two anonymous referees for helpful comments on an earlier version of the paper.

Correspondence: Carol Horton Tremblay, Department of Economics, Oregon State University, Corvallis, Oregon 97331, USA. Tel: +1-541-737-1468; Fax: +1-541-737-5917; Email: ctremblay@oregonstate.edu.

ABSTRACT

Cournot establishes a Nash equilibrium to a duopoly game under output competition; Bertrand finds a different Nash equilibrium under price competition. Both treat the strategic choice variable (output versus price) and the timing of play as exogenous. We investigate Cournot-Bertrand models where one firm competes in output and the other competes in price in both static and dynamic settings. We also develop a general model where both the timing of play and the strategic choice variables are endogenous. Consistent with the conduct of Honda and Scion, we show that Cournot-Bertrand behaviour can be a Nash equilibrium outcome.

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