Reference

Sébastien Mitraille, and Michel Moreaux, Inventories and Endogenous Stackelberg Leadership in Two-period Cournot Oligopoly, TSE Working Paper, n. 12-322, February 2012.

Abstract

Two-period Cournot competition between n identical firms producing at constant marginal cost and able to store before selling has pure strategy Nash-perfect equilibria, in which some firms store to exert endogenously a leadership over rivals. The number of firms storing balances market share gains, obtained by accumulating early the output, with losses in margin resulting from increased sales and higher operation costs. This number and the industry inventories are non monotonic in n. Concentration (HHI) and aggregate sales increase due to the strategic use of inventories.

JEL codes

  • D43: Oligopoly and Other Forms of Market Imperfection
  • L13: Oligopoly and Other Imperfect Markets