Strategic Price and Quantity Choices

Abstract

In this chapter, I present a systematic overview of the market outcomes for classical oligopoly games. This study contains six games: pure quantity competition, pure price competition as well as price and quantity competition, each with simultaneous and sequential moves. I present equilibrium prices, quantities and profits for each game. In particular, I present the mixed strategy equilibrium of the simultaneous price and quantity competition. This equilibrium was found by Gertner (1986), but remained unrecognized so far. From a comparison of market outcomes, I can classify situations where the choice of decision variable(s) and timing gives strategic advantages.

Keywords: Decision variables, judo game, mixed strategy equilibrium, price, quantity, oligopoly competition, price leadership games, price-quantity game, simultaneous move games, sequential move games.