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Do oligopolistic firms benefit from being forced to act non‐strategically?

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  • Mehdi Fadaee
  • Hamideh Esfahani
Abstract
The present study seeks to answer the question of whether acting non‐strategically can benefit firms. In a static Cournot framework, if a subset of firms are constrained to the equilibrium level of output, being non‐strategic will have no impact on profits of neither constrained nor strategic firms and provided that sufficiently large number of firms are restricted, a marginal quantity contraction can be to their benefit. In contrast, using a dynamic Cournot framework, we find that the constraint set at the equilibrium level or moderately deviated from it, leads to increased profits for all firms irrespective of the number of non‐strategic ones.

Suggested Citation

  • Mehdi Fadaee & Hamideh Esfahani, 2023. "Do oligopolistic firms benefit from being forced to act non‐strategically?," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(1), pages 127-147, March.
    • Handle: RePEc:bla:ijethy:v:19:y:2023:i:1:p:127-147
    DOI: 10.1111/ijet.12340
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    References listed on IDEAS

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    1. Dockner, Engelbert J. & Gaunersdorfer, Andrea, 2001. "On the profitability of horizontal mergers in industries with dynamic competition," Japan and the World Economy, Elsevier, vol. 13(3), pages 195-216, August.
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