Luca Lambertini, Sougata Poddar, Dan Sasaki

Price versus Quantity Revisited

  • Abstract

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We revisit Singh-Vives (1984) and Boyer-Moreaux (1987) to inspect the age-old problem of endogenous choices between price- and quantity-setting behaviour in an oligopolistic market. We establish that, when there is room for cost sharing between the firms (as is often the case in joint ventures in product development or shared infrastructural utilities), the well-established result by Singh and Vives that firms endogenously choose quantity (resp., price) as a dominant strategy when their products are substitutes (resp., complements) may not be the only equilibrium outcome. In particular, the procedural order between firms' cost sharing decisions and their marketing decisions makes a key difference in the resulting equilibrium profiles.

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