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Duopoly Experimentation: Cournot And Bertrand Competition

Author

Listed:
  • Amparo Urbano

    (Universitat de València)

  • María Dolores Alepuz Domenech

    (Universitat de València)

Abstract
This paper analyzes how leaming behaviour can modify the outcome of competition in an industry facing demand uncertainty. We consider a duopoly game where firms have imperfect information about market demand and leam through observing prices (Coumot competition) or sales (Bertrand) . The main body of the paper consists in showing how duopoly experimentation is affected by the type of market competition. We find that, if the goods are substitutes, firms will experiment more under Bertrand than under Coumot. If the goods are complements, the result is reversed. Furthermore, there is less experimentation under Coumot with product substitution.

Suggested Citation

  • Amparo Urbano & María Dolores Alepuz Domenech, 1991. "Duopoly Experimentation: Cournot And Bertrand Competition," Working Papers. Serie AD 1991-07, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:1991-07
    as

    Download full text from publisher

    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-1991-07.pdf
    File Function: Fisrt version / Primera version, 1991
    Download Restriction: no
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    References listed on IDEAS

    as
    1. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
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    4. Aghion, Philippe & Espinosa, Maria Paz & Jullien, Bruno, 1993. "Dynamic Duopoly with Learning through Market Experimentation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(3), pages 517-539, July.
    5. Vives, Xavier, 1990. "Information and competitive advantage," International Journal of Industrial Organization, Elsevier, vol. 8(1), pages 17-35.
    6. Herrero, Carmen & Villar, Antonio, 1991. "Vector mappings with diagonal images," Mathematical Social Sciences, Elsevier, vol. 22(1), pages 57-67, August.
    7. Mirman, Leonard J & Samuelson, Larry & Urbano, Amparo, 1993. "Duopoly Signal Jamming," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(1), pages 129-149, January.
    8. Mirman, Leonard J & Samuelson, Larry & Urbano, Amparo, 1993. "Monopoly Experimentation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(3), pages 549-563, August.
    9. Michael H. Riordan, 1985. "Imperfect Information and Dynamic Conjectural Variations," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 41-50, Spring.
    10. Drew Fudenberg & Jean Tirole, 1986. "A "Signal-Jamming" Theory of Predation," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 366-376, Autumn.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Dolores Alepuz, M. & Urbano, Amparo, 1999. "Duopoly experimentation: Cournot competition," Mathematical Social Sciences, Elsevier, vol. 37(2), pages 165-188, March.

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