Intertemporal market division: A case of alternating monopoly

PJJ Herings; R Peeters; MP Schinkel

doi:10.1016/S0014-2921(03)00102-8

Intertemporal market division: A case of alternating monopoly

PJJ Herings^*, R Peeters, MP Schinkel

^*Corresponding author for this work

Econometrics and Operations Research

Research output: Contribution to journal › Article › Scientific › peer-review

Abstract

In this paper, we report on an equilibrium with market dominance that exists in a simple two-firm model that features neither entry barriers nor sophisticated punishment strategies. This equilibrium induces an intertemporal market division in which the two firms alternate as monopolists - despite the fact that the model also sustains a Cournot duopoly. Even when initially both firms are active in the market, the alternating monopoly reveals itself rather quickly. Moreover, it Pareto dominates the Cournot equilibrium - as it is close to the cartel outcome. Several examples of what well may be such alternating monopolies are presented. (c) 2003 Elsevier B.V. All rights reserved.

Original language	English
Pages (from-to)	1207-1223
Number of pages	17
Journal	European Economic Review
Volume	49
Issue number	5
DOIs	https://doi.org/10.1016/S0014-2921(03)00102-8 https://doi.org/10.1016/j.euroecorev.2003.09.001
Publication status	Published - Jul 2005

Keywords

dynamic competition
oligopolistic competition
Stochastic games
monopoly
POTENTIAL COMPETITION
SEQUENTIAL ENTRY
STOCHASTIC GAMES
WELFARE
DETERRENCE
COSTS

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title = "Intertemporal market division: A case of alternating monopoly",

abstract = "In this paper, we report on an equilibrium with market dominance that exists in a simple two-firm model that features neither entry barriers nor sophisticated punishment strategies. This equilibrium induces an intertemporal market division in which the two firms alternate as monopolists - despite the fact that the model also sustains a Cournot duopoly. Even when initially both firms are active in the market, the alternating monopoly reveals itself rather quickly. Moreover, it Pareto dominates the Cournot equilibrium - as it is close to the cartel outcome. Several examples of what well may be such alternating monopolies are presented. (c) 2003 Elsevier B.V. All rights reserved.",

keywords = "dynamic competition, oligopolistic competition, Stochastic games, monopoly, POTENTIAL COMPETITION, SEQUENTIAL ENTRY, STOCHASTIC GAMES, WELFARE, DETERRENCE, COSTS",

author = "PJJ Herings and R Peeters and MP Schinkel",

year = "2005",

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journal = "European Economic Review",

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T1 - Intertemporal market division

T2 - A case of alternating monopoly

AU - Herings, PJJ

AU - Peeters, R

AU - Schinkel, MP

PY - 2005/7

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N2 - In this paper, we report on an equilibrium with market dominance that exists in a simple two-firm model that features neither entry barriers nor sophisticated punishment strategies. This equilibrium induces an intertemporal market division in which the two firms alternate as monopolists - despite the fact that the model also sustains a Cournot duopoly. Even when initially both firms are active in the market, the alternating monopoly reveals itself rather quickly. Moreover, it Pareto dominates the Cournot equilibrium - as it is close to the cartel outcome. Several examples of what well may be such alternating monopolies are presented. (c) 2003 Elsevier B.V. All rights reserved.

AB - In this paper, we report on an equilibrium with market dominance that exists in a simple two-firm model that features neither entry barriers nor sophisticated punishment strategies. This equilibrium induces an intertemporal market division in which the two firms alternate as monopolists - despite the fact that the model also sustains a Cournot duopoly. Even when initially both firms are active in the market, the alternating monopoly reveals itself rather quickly. Moreover, it Pareto dominates the Cournot equilibrium - as it is close to the cartel outcome. Several examples of what well may be such alternating monopolies are presented. (c) 2003 Elsevier B.V. All rights reserved.

KW - dynamic competition

KW - oligopolistic competition

KW - Stochastic games

KW - monopoly

KW - POTENTIAL COMPETITION

KW - SEQUENTIAL ENTRY

KW - STOCHASTIC GAMES

KW - WELFARE

KW - DETERRENCE

KW - COSTS

U2 - 10.1016/S0014-2921(03)00102-8

DO - 10.1016/S0014-2921(03)00102-8

M3 - Article

SN - 0014-2921

VL - 49

SP - 1207

EP - 1223

JO - European Economic Review

JF - European Economic Review

IS - 5

ER -

Intertemporal market division: A case of alternating monopoly

Abstract

Keywords

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