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NB: Tõnu Puu kirjavahetaja autorina JED&C värskes vihikus:

 Cournot duopoly when the competitors operate multiple production plants

Fabio Tramontanaa, Laura Gardinib, , and Tönu Puuc

aDepartment of Economics, Ancona University, Italy

bDepartment of Economics and Quantitative Methods, Urbino University, Italy

cCERUM, Umeå University, SE-90187 Umeå, Sweden
Abstract

This article considers a Cournot duopoly under an isoelastic demand function and cost functions with built-in capacity limits. The special feature is that each firm is assumed to operate multiple plants, which can be run alone or in combination. Each firm has two plants with different capacity limits, so each has three cost options, the third being to run both plants, dividing the load according to the principle of equal marginal costs. As a consequence, the marginal cost functions come in three disjoint pieces, so the reaction functions, derived on basis of global profit maximization, may also consist of disjoint pieces. This is reflected in a particular bifurcation structure, due to border-collision bifurcations and to particular basin boundaries, related to the discontinuities. It is shown that stable cycles may coexist, and the non-existence of unstable cycles constitutes a new property. We also compare the coexistent short periodic solutions in terms of the resulting real profits.

Volume 33, Issue 1, January 2009, Pages 250-265
 
 

detsember 16, 2008 - Posted by | Uncategorized

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