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Document de travail 2017-22

Hierarchical competition and heterogeneous behavior in noncooperative oligopoly markets

Ludovic A. Julien

Résumé :

In this paper, we consider a sequential bilateral oligopoly market which embodies a finite number of leaders and followers who compete on quantities. We define a noncooperative equilibrium concept for this two-stage market game with complete and perfect information, namely the Stackelberg-Nash equilibrium (SNE). Then, we study the existence of a SNE with trade. The existence proof requires some steps as this market game displays a rich set of strategic interactions. In particular, to show the existence of a pure strategy subgame perfect Nash equilibrium, we have to determine the conditions under which there exist well defined continuously differentiable best responses. Some examples buttress the approach and discuss the assumptions made on the primitives.

Classification JEL : C72, D51.

Mots-clés : Best responses, Stackelberg-Nash equilibrium, trade, autarky.


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