Economists use various models to explain why it is that firms are capable of pricing above marginal cost. In this paper, we will examine two of them: the Cournot and Bertrand duopoly models. Economists generally accept both models as good explanations of the phenomenon, but the two models contradict each other in various important ways. The puzzle is that two inconsistent explanations are both regarded as good explanations for the same phenomenon. This becomes especially worrisome when the two models (...) are offering divergent policy recommendations. This report presents that puzzle by laying out how the two models contradict each other in a myriad of ways and then offers five possible solutions to that puzzle from various economists, philosophers of science, and philosophers of economics. (shrink)

Technology licensing as a vital part of business behavior in many industries has drawn a fair amount of attention in industrial organization literature. Most existing literature on licensing decisions assumes that all firms engage in Cournot or Bertrand competition, while the type of mixed competition may affect the choice of the licensor. In this context, what decision will the licensor make faced with different mixed competitions? This paper studies the optimal technology licensing contract of a licensor firm (...) engaging in different mixed competitions with a potential licensee in a differentiated duopoly market considering one upstream firm that provides key inputs. We find that if either the royalty or fixed-fee licensing is applied, the licensor favors royalty licensing under Bertrand-Cournot competition when the degree of substitution is small and prefers the fixed-fee licensing no matter under what kind of mixed competition as the degree of substitution increases. In the case of fixed-fee licensing, the result shows that the profits of licensors are the same under different types of mixed competition. Besides, fixed-fee licensing is not always the optimal choice for consumers, and they would prefer royalty licensing when the degree of substitution is very small. (shrink)

Two questions are examined within a model of vertical differentiation. The first is whether cost-reducing innovations are more likely to be observed in regimes of more intense or less intense competition. Following Delbono and Denicolo (1990) and Bester and Petrakis (1993) we compare two identical industries that differ only in the regime of competition: Bertrand versus Cournot. Since Cournot competition leads to lower output and higher prices, it can be thought of as a regime of (...) less intense competition. We find that the increase in profits associated with any given cost reduction is higher in the case of Cournot competition than in the case of Bertrand competition. Thus there are cost-reducing innovations that would be pursued under Cournot competition but not under Bertrand competition. (shrink)

In this article, we revisit the classic comparison between Bertrand and Cournot competition in the presence of a cartel of firms that faces outsiders acting individually. This competition setting enables to deal with both non-cooperative and cooperative oligopoly games. We concentrate on industries consisting of symmetrically differentiated products where firms operate at a constant and identical marginal cost. First, while the standard Bertrand–Cournot rankings still hold for Nash equilibrium prices, we show that the results may be (...) altered for Nash equilibrium quantities and profits. Second, we define cooperative Bertrand and Cournot oligopoly games with transferable utility on the basis of their non-cooperative foundation. We establish that the core of a cooperative Cournot oligopoly game is strictly included in the core of a cooperative Bertrand oligopoly game when the number of firms is lower or equal to 25. Moreover, we focus on the aggregate-monotonic core, a subset of the core, that has the advantage to select point solutions satisfying both core selection and aggregate monotonicity properties. We succeed in comparing the aggregate-monotonic cores between Bertrand and Cournot competition regardless of the number of firms. Finally, we study a class of three-firm oligopolies with asymmetric costs in which the core inclusion property mentioned above still holds. We also provide numerical examples to illustrate the difficulty to generalize this result to an arbitrary number of firms because of negative equilibrium quantities. (shrink)

This paper studies the entry strategies of firms on risky markets. We focus on markets where demand is affine and cost is linear; moreover, the demand includes a normally distributed random variable. In such a model, we show that the leader’s strategy changes with the level of market risk even when firms are risk neutral. Therefore, the availability of future information for a Stackelberg follower has a feedback effect on the leader’s strategy. We also show that compared with traditional markets (...) with no risk, the basic trade-off between flexibility and pre-commitment is only slightly changed in the qualitative game where firms are free to choose when to enter the market. (shrink)

We study an extension of Stackelberg’s model in which many firms can produce at many different times. Demand is affine, while cost is linear. In this setting, we investigate whether Stackelberg’s results in a two-firm game are robust when the number of firms increases. We show that firms may not need to anticipate further entries, leaders might earn less than in the simultaneous game, and, whatever its cost and its time of entry, the firm’s entry always improves welfare.

Perfect competition provides the model of a frictionless economy, in which price-setting economic agents behave independently of each other, abandoning to the market the coordination of their individual decisions. The implications of this model are extensively presented in the traditional price theory textbooks. Imperfect competition is the paradigm that develops as soon as economic agents interact in a conscious manner, which is the rule when competition takes place amongst a restricted number of agents. In this system, agents (...) act strategically, taking into account the impact of their decisions on competitors' behaviour and on the price mechanism. Such situations commonly arise when firms differentiate their products, erect strategic entry barriers, or exploit the imperfect information of their customers about the price or characteristics of their product. This book explores the theoretical richness of these economic contexts, using some basic tools of game theory. Designed as an ancillary text for graduate students, it not only summarizes the historic contributions made by economic theorists such as Cournot and Edgeworth, but also makes accessible many of the most recent developments in the same field. (shrink)

This paper considers a one-stage Cournot duopoly of R&D. We characterize the Nash equilibrium of the one-stage game and provide a comparison with the two-stage version of the same Cournot model of R&D/product market competition. We look at R&D expenditures, profits, output and welfare. Under perfect symmetry, the one-stage model always leads to higher profits when the spillover parameter is not equal to 1/2. Moreover, the one-stage model implies more R&D expenditure and higher welfare if and only (...) if the spillover parameter is greater than 1/2. The insights are robust to an n -firm generalization, but the differences between the one-stage game and the two-stage game disappear as the market becomes perfectly competitive. (shrink)

Pricing algorithms are computerized procedures a seller may use to adapt instantaneously its price to market conditions, including to prices quoted by its rivals. These algorithms are related to the extensive use of web-collectors which contribute in many industries to identifying the best price. In such settings, price competition operates between algorithms, no longer between executives of brick and mortar companies. In this context, the question is to know how implicit forms of collusion may arise between the sellers. This (...) paper is aimed at discussing this conceptual issue in a price-setting homogeneous product oligopoly with decreasing returns to scale where algorithms implement matching policies. Using fixed point argument, we find a family of equilibrium prices encompassing Cournot and Pareto efficient solutions, if matching is allowed upward and downward. Dynamical stability is studied in the linear demand constant return case. When matching operates only for price undercutting, this family is extended up to a bottom value of the market price, close to the Walrasian price. Pricing algorithms may solve the Bertrand–Edgeworth paradox. (shrink)

Recent empirical research demonstrates that cross-holding engenders significant anti-competitive effect even though it confers no decisive influence on the target firm. This research has obtained wide attention, which leads to both calls for and actual changes in antitrust policy. However, the effects of cross-holding on competition are not well established. This paper examines the collusive effect of cross-holding with asymmetry in cost functions across firms in an infinitely repeated Cournot duopoly game. The two firms have a different share (...) of capital that affects marginal costs. We find that cross-holding facilitates collusion when a small firm (i.e., a firm with a small capital capacity) increases its passive ownership in a big firm (i.e., a firm with a large capital capacity), and the size of initial ownership is relatively small. Unexpectedly, collusion becomes more difficult to be sustained when a big firm increases ownership in a small firm, or when a small firm increases ownership in a big firm but the initial ownership is relatively large. Our result that cross-holding may either facilitate or hinder collusion, under certain circumstances, generates important implications for antitrust policy. (shrink)

Errol Lord explores the boundaries of epistemic normativity. He argues that we can understand these better by thinking about which mental states are competitors in rationality’s competition. He argues that belief, disbelief, and two kinds of suspension of judgment are competitors. Lord shows that there are non-evidential reasons for suspension of judgment. One upshot is an independent motivation for a certain sort of pragmatist view of epistemic rationality.

The dominant view on the ethics of cognitive enhancement (CE) is that CE is beholden to the principle of autonomy. However, this principle does not seem to reflect commonly held ethical judgments about enhancement. Is the principle of autonomy at fault, or should common judgments be adjusted? Here I argue for the first, and show how common judgments can be justified as based on a principle of service.

Understanding religion requires explaining why supernatural beliefs, devotions, and rituals are both universal and variable across cultures, and why religion is so often associated with both large-scale cooperation and enduring group conflict. Emerging lines of research suggest that these oppositions result from the convergence of three processes. First, the interaction of certain reliably developing cognitive processes, such as our ability to infer the presence of intentional agents, favors—as an evolutionary by-product—the spread of certain kinds of counterintuitive concepts. Second, participation in (...) rituals and devotions involving costly displays exploits various aspects of our evolved psychology to deepen people's commitment to both supernatural agents and religious communities. Third, competition among societies and organizations with different faith-based beliefs and practices has increasingly connected religion with both within-group prosociality and between-group enmity. This connection has strengthened dramatically in recent millennia, as part of the evolution of complex societies, and is important to understanding cooperation and conflict in today's world. (shrink)

Augustin Cournot (1801-1877) a marqué l'histoire de la pensée économique en introduisant la modélisation des phénomènes économiques, et non leur seule quantification. Ce constat appelle une double question : 1° Comment la rupture opérée par Cournot s'inscrit-elle dans l'histoire et l'évolution des méthodes de l'économie? La question se pose d'autant plus que les Recherches sur les principes mathématiques de la théorie des richesses passèrent d'abord presque inaperçues. 2° Que reste-t-il aujourd'hui de ce tournant effectué par le «philosophe-géomètre»? Autrement (...) dit, comment penser l'actualité de l'œuvre économique de Cournot? Or, avant d'être un économiste, Cournot est d'abord mathématicien et philosophe. Comment son œuvre économique s'accorde-t-elle alors avec son activité de mathématicien, et comment prend-elle place dans sa réflexion philosophique, c'est-à-dire à la fois dans sa théorie de la connaissance et dans sa philosophie de l'action et de la décision? Comprendre la portée de l'œuvre économique de Cournot et sa place dans son œuvre multiforme, tel est le projet qui anime le présent ouvrage où économistes, philosophes, historiens des sciences et sociologue entrecroisent leurs approches de celui qui demeure l'un des économistes et des philosophes majeurs du XIXe siècle."--Page 4 of cover. (shrink)

The E.U. is shortly before implementing the Digital Markets Act (DMA), which aims to regulate digital markets and (ideally) rein in the power of big tech gatekeepers. Several researchers claim that this proposal – and especially its goal to ensure the contestability and fairness of digital markets – is ordoliberal in nature, yet what is missing in the academic literature is a closer look at the parallels (and differences) between the E.U.’s competition policy (and the DMA) and ordoliberalism. This (...) paper tries to close the gap and help answer the question of whether the DMA is indeed standing in an ordoliberal tradition. Furthermore, it evaluates the Act’s institutional strengths and weaknesses – as seen from an ordoliberal perspective – and points out potential ways to strengthen E.U. competition policy (and the DMA) and bring it closer to the ordoliberal ideal. (shrink)

This study aims to explore effective ways to improve college students’ entrepreneurial self-efficacy and intentions through entrepreneurship education. The survey used a random sample of 804 college students in Zhejiang Province, China. The results show that: In terms of the characteristics of entrepreneurial intention, there are significant differences in gender, entrepreneurial experience, entrepreneurial competition experience, and family background of self-employment. There are significant differences in the characteristics of entrepreneurship education in gender, entrepreneurial competition experience, and the family background (...) of self-employment. In the relationship among entrepreneurship education, entrepreneurial self-efficacy, and entrepreneurial intention, entrepreneurship education is significantly and positively related to entrepreneurial self-efficacy and entrepreneurial intention. Entrepreneurial self-efficacy is significantly and positively associated with entrepreneurial intention. Entrepreneurial self-efficacy plays a complete mediating role between entrepreneurship education and entrepreneurial intention. Entrepreneurial self-efficacy also has a suppressing effect on the relationship between the two. Entrepreneurial competition experience moderates the second half of the mediating effect of entrepreneurial self-efficacy. Finally, the study offers several proposals for the teaching practice of entrepreneurship education. (shrink)

Newsome ((2003). The debate between current versions of covariation and mechanism approaches to causal inference. Philosophical Psychology, 16, 87-107.) recently published a critical review of psychological theories of human causal inference. In that review, he characterized covariation and mechanism theories, the two dominant theory types, as competing, and offered possible ways to integrate them. I argue that Newsome has misunderstood the theoretical landscape, and that covariation and mechanism theories do not directly conflict. Rather, they rely on distinct sets of reliable (...) indicators of causation, and focus on different types of causation (type vs. token). There are certainly debates in the research field, but the theoretical landscape is not as fractured as Newsome suggests, and a potential unifying framework has already emerged using causal Bayes nets. Philosophical work on causal epistemology matters for psychologists, but not in the way Newsome suggests. (shrink)

The purpose of our study is to investigate the effects of the number of products, product attributes, and prices on consumer confusion, conduct a numerical analysis to check the robustness of the results, and present an example of the cell phone market in Japan. Following an ideal point model and embedding the number of products and product attributes, we clarify how these factors affect consumer confusion and purchase probability. We show that as the number of product attributes increases, the choice (...) probability of each product becomes equal, implying that consumer confusion occurs. This result is robust to the introduction of prices as strategic variables. (shrink)

This paper explores the role of inequity aversion as an explanation for observed behavior in experimental Cournot oligopolies. We show that inequity aversion can change the nature of the strategic interaction: quantities are strategic substitutes for sufficiently asymmetric output levels but strategic complements otherwise. We find that inequity aversion can explain why: some experiments result in higher than Cournot–Nash production levels while others result in lower, collusion often occurs with only two players whereas with three or more players (...) market outcomes are very close to Cournot–Nash, and players often achieve equal profits in asymmetric Cournot oligopoly. (shrink)