Meeting the Competition: Commitment and Competitive Behavior

In this paper, we represent 'meet the competition' guarantees as the endogenous outcome of a non-cooperative game. We model the phenomenon by assuming that firms compete in supply schedules in a two-stage process. We assume that the choice of a negatively sloped supply schedule is costly. In particular, we use Cournot behavior as a benchmark. Cournot competition entails firms choosing a fixed quantity independent of the mar- ket price. We assume that it is costly for firms to deviate from a fixed output level. Our main result shows that in equilibrium, firms behave less competitively than the Cournot benchmark when they are able to commit to a degree of responsiveness in the first stage of the competition game.


Issue Date:
Dec 28 2012
Publication Type:
Working or Discussion Paper
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/151205
PURL Identifier:
http://purl.umn.edu/151205
Total Pages:
11
JEL Codes:
L11
Series Statement:
Risk and Uncertainty Program
R12/6




 Record created 2017-04-01, last modified 2020-10-28

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