Coalition-Proof Supply Function Equilibria Under Capacity Constraints

Posted: 25 Nov 2014 Last revised: 14 Apr 2015

See all articles by Juan Delgado

Juan Delgado

GAMES Economics; Universidad Carlos III de Madrid - Economics Dpt.

Date Written: January 24, 2006

Abstract

Whereas in the absence of capacity constraints the Cournot outcome is the unique coalition-proof supply function equilibrium outcome, the presence of capacity constraints may enlarge the set of equilibrium outcomes. Interestingly, if capacities are sufficiently asymmetric the new equilibrium prices are below the Cournot price. These results have important implications for merger and privatization policies: specifically, capacity divestiture will not necessarily imply lower market prices.

Keywords: Oligopoly; Cournot; Competition via supply functions; Coalition-proofness; Capacity constraints

JEL Classification: C72; D43; L13; L51

Suggested Citation

Delgado, Juan, Coalition-Proof Supply Function Equilibria Under Capacity Constraints (January 24, 2006). Economic Theory, Vol. 29, No. 1, 2006, Available at SSRN: https://ssrn.com/abstract=2530095

Juan Delgado (Contact Author)

GAMES Economics ( email )

Calle Manzana 7
Madrid, 28015
Spain

HOME PAGE: http://https://gamesecon.com/juan-delgado/

Universidad Carlos III de Madrid - Economics Dpt. ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

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