Rabah Amir and Jim Y. Jin

"Cournot and Bertrand equilibria compared: substitutability, complementarity and concavity"

JEL codes: D43, L13
Keywords: mixed-products oligopoly, competitiveness criteria

Abstract: This paper assesses the view that Bertrand equilibrium is intrinisically more competitive than Cournot equilibrium. We consider an oligopoly model with linear demand, and a mixture of substitute and complementary products. Our results provide support for the conventional wisdom, and also indicate its limitations. We provide counter-examples showing that no clear-cut comparison of prices and quantities is possible without strategic complementarity in either of the two games. However, price competition is indeed more competitive according to the following criteria: lower mark-up/output ratios, larger aveage output, and lower average price.