Hierarchical Competition and Heterogeneous Behavior in Bilateral Oligopoly Markets

Event Date: 9 November 2016

Speaker: Ludovic Julien, Universite Paris Quest-Nanterre

Time: 4.15pm

Venue: Strathclyde Business School, Cathedral Wing (CW) 406a

Abstract:   In this paper, we consider a two-stage bilateral oligopoly market in which heterogeneous traders compete on quantities. We define an equilibrium concept, namely the Stackelberg-Nash equilibrium (SNE). Then, we study the existence of an SNE with trade. To this end, we consider a finite extensive form game of complete and perfect information in which several leaders and followers interact within each side and between both sides of the market. The existence proof is made by considering a slight perturbation of the market game. We notably determine (the conditions under which) the optimal behavior of the followers (may be written) as functions of the strategy profiles of leaders. Then, we show the existence of a pure strategy subgame perfect Nash equilibrium with trade in the perturbed market game. Finally, we show the SNE with trade is an equilibrium point. Some examples which outline our assumptions are discussed.

Published: 3 November 2016