On hierarchical competition in oligopoly

Abstract : In this paper, we consider a hierarchical oligopoly model, in which firms compete on quantities of an homogeneous product. We provide a proof and an interpretation that under the three necessary and sufficient conditions of linear aggregate demand, constant and identical marginal costs, the strategy of leaders at any stage depends neither on the number of leaders who play after nor on the number of remaining stages. So, all firms behave as Cournotian oligopolists on the residual demand. We show that these three assumptions are not only sufficient but also necessary. Any departure from any of these assumptions rules out this property.
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Ludovic A. Julien, Olivier Musy, Aurélien Saidi. On hierarchical competition in oligopoly. Journal of Economics, Springer Verlag, 2012, 3 (107), pp.217-237. ⟨10.1007/s00712-012-0286-4⟩. ⟨hal-01385836⟩

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