Abstract
In this paper, a two-stage model is presented in which firms choose market structure in stage one and play a Cournot game in the second stage. In a one-period game, if a single firm is given a choice in stage one, it will choose to form independent rival divisions rather than remain as a unified whole. The subgame perfect equilibrium outcome of this game is the same as in a Stackelberg game in which one firm commits to quantity prior to the simultaneous choice of quantity by its rivals. In a multi-period game, with firms making alternating market structure choices, it is possible to generate endogenous cyclical fluctuations in market concentration.
Original language | English (US) |
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Pages (from-to) | 365-371 |
Number of pages | 7 |
Journal | Economics Letters |
Volume | 40 |
Issue number | 3 |
DOIs | |
State | Published - Nov 1992 |