An Introduction to Imperfect Competition via Bilateral Oligopoly

TL;DR

This paper introduces a unified framework for analyzing various oligopoly models, comparing simultaneous and sequential moves, and explores how strategic or competitive behaviors emerge endogenously based on economic fundamentals.

Contribution

It provides a comprehensive comparison of bilateral oligopoly models with Cournot and Walras approaches, and demonstrates their application to different oligopoly types and behaviors.

Findings

Unified framework for bilateral oligopoly models

Comparison of simultaneous and sequential move outcomes

Insights into endogenous emergence of strategic or competitive behaviors

Abstract

The aim of this paper is threefold. First, we provide a unified framework, by means of non-trivial examples, to compare the results obtained in simultaneous-move and sequential-move versions of bilateral oligopoly with the Cournot model and the Cournot-Walras approach. We also survey the main contributions on imperfect competition and strategic market games that are linked with our analysis. Secondly, we show how the bilateral oligopoly model can be used to study different kinds of oligopoly: symmetric oligopoly, where all agents act strategically; asymmetric oligopoly where only some agents act strategically; simultaneous oligopoly, where sellers and buyers make their choices without knowledge of others' decisions; and sequential oligopoly, where some agents move first. Thirdly, we focus on how the bilateral oligopoly model can clarify how either strategic or competitive behaviours may emerge endogenously depending on the fundamentals of the economy.