Cournot Model Research Articles

A Dynamic Duopoly Cournot Model with R&D Efforts and Its Dynamic Behavior Analysis

In this paper, a dynamic two-stage Cournot duopoly game with R&D efforts is built. Then, the local stability of the equilibrium points are discussed, and the stability condition of the Nash equilibrium point is also deduced through Jury criterion. The complex dynamical behaviors of the built model are investigated by numerical simulations. We found that the unique route to chaos is flip bifurcation, and the increase of adjusting speed will cause the system to lose stability and produce more complex dynamic behavior. In addition, we also found the phenomenon of multistability in the given model. Several kinds of coexistence of attractors are shown. In particular, we found that boundary attractors can coexist with internal attractors, which also aggravates the complexity of the system. At last, the chaotic state in the built system has been successfully controlled.

Resource management in the federated cloud environment using Cournot and Bertrand competitions

Cloud federation helps cloud providers to scale up by renting resources from other providers when the workload increased. Moreover, cloud providers with idle or underutilized resources can sell their resources to others and earn revenue inside a cloud federation. One of the most critical problems in the federated cloud environment is the management of resources and cloud providers. The game theory seems to be an excellent way to model cloud federation. This paper introduces a new model for resource management between cloud providers in a centralized federated cloud environment, based on the well known Cournot and Bertrand games. To resolve the problem of heterogeneous resources, a physical resource unit which has specific computational features and can be shared between cloud providers is introduced in this paper. Besides, by introducing a new revenue-sharing approach between providers, this paper increased the collaboration of different providers. This model is implemented by the federated Cloudsim tool, and experiments show that the Cournot model outperforms others in terms of overall benefit and responsiveness. In other words, Cournot model can respond to an acceptable number of requests while making more profit. Besides, the reviews show that the proposed model works better than other methods in terms of time.

Game theoretic production decisions of by-product materials critical for clean energy technologies - Indium as a case study

Clean energy technologies represent a promising solution to the global warming challenge. However, many of them depend on some minor metals, and concerns about their rapidly increasing demand have been raised recently. Since minor metals are produced along with other materials, called base metals, they are also referred as by-product materials. With this characteristic, their production quantities rely on the production quantities of the base metals. Therefore, the production decisions for the by-product materials are not easy, and the decisions become even more complex under competitive market. This research seeks to find equilibrium production quantities of both base and by-product materials using Cournot model. Then, the model is applied to a case study of indium, which is critical for two emerging clean energy technologies, thin-film solar photovoltaic and light emitting diode lighting. The numerical analysis in the case study suggests some meaningful insights in this market, and the equilibrium production quantities are also compared with the optimal production quantity under monopoly market condition.

English

English

Process innovation and inter-hospital competition

ABSTRACT We used a Cournot model to associate process innovation with the market structure in a theoretical duopoly for secondary healthcare. We considered a situation wherein neither incumbent hospital focuses on process innovation and another situation wherein one hospital brings in process innovation but another does not. This approach highlights two points. The first concerns secondary care settings wherein incentives for process innovation in healthcare provided by hospitals can be created with moderate marginal costs. Inter-hospital competition lowers costs for patients and improves consumer surplus. The second point concerns primary and tertiary care wherein marginal costs are rather high or low and incentive to innovate processes is limited. In such settings, inter-hospital competition does not improve consumer surplus and is less likely to reduce costs. As a result, neither hospital may choose to provide these types of care.

Serious Game Supply Chain Management Agribusiness as a Production Planning using Cournot Model

An agro-industry must have a competitor, to maintain its business is needed a strategy to compete with competitors. Competition can be done if they have information on the number of products and prices set in the market. This research develops serious game SCM agribusiness as production planning using cournot model. SCM concept is an important part of modern management. SCM concept consists of collaborative, planning, forecasting and replenishment. By using Serious Game Supply Chain Management Agribusiness as a Production Planning using Cournot Model, agroindustry will maximize profit when Marginal Revenue (MR) is equal to Marginal Cost (MC), in the short time the agroindustry will get economic profit greatest.

On the Competitive Mechanism Concerning the Third-Party Transaction in Chinese Market

AbstractThis paper seeks to position the third-party transaction (TPT) in the macrostructure of Chinese market in terms of Concentration Ratio and Herfindahl-Hirschman Index. By extending both Cournot oligopolistic and Stackelberg oligopolistic competition models, a new oligopolistic competition model is established for China’s TPT market. Based on multidimensional game, a pricing game model is theorized accordingly to elucidate the TPT platform. The influence of various factors on the price of the TPT platform is verified with numerical simulation. The formation of monopoly is an inevitable consequence of the “one superpower and multi powers” market structure given the unregulated development of TPT enterprises as the prerequisite. In addition, through the studies on telecom payment market, such unregulated development can also cause the “big-three” domination for the TPT enterprises in the “multi powers” market structure. Based on our modelizations, this paper serves to provide prospect recommendations for policy-making of state supervision authorities.

Risk-adjusted efficiency and bank size in a developing economy: an analysis of Vietnamese banks

PurposeThere is ample empirical evidence to show that larger banks are more efficient than smaller banks in developed countries. However, there is very little empirical evidence to show that in small developing economies, such as Vietnam, bank size is associated with increased risk, especially credit risk. This paper aim to provide empirical evidence to fill in this gap. This paper employs a slack-based directional distance function using the intermediation approach in measuring the inefficiency of banks in Vietnam during the period 2006–2015. Non-performing loans are used as an undesirable output to capture credit risk. The results show that small banks are more efficient than large banks at the mean level and across the entire distributions of inefficiency of the two groups. Input waste, output shortage and risk surplus of big banks are nearly three times higher than those of small banks. The results are robust under constant and variable returns to scale for production technologies. The study’s empirical results contribute to the ongoing debate on the merits of enlarging bank size in a small transitional economy and suggest that policy makers should pay attention to the risk and inefficiency of large banks to enhance the performance of Vietnam's banking system as a whole.Design/methodology/approachThis paper uses the non-radial slack-based directional technology distance function developed by Färe and Grosskopf (2010) to estimate the efficiency of banks using the data envelopment analysis technique. Data for 44 commercial banks are used.FindingsThe empirical results of the paper contribute to the ongoing debate on the merits of enlarging bank size in a small transitional economy and suggest that policy makers should pay attention to the risk and inefficiency of large banks to improve the performance of Vietnam's banking system as a whole.Originality/valueThis paper extends the extant literature by examining whether efficiency is associated with size in a typical transitional developing economy. The classic Cournot model, the structure-conduct-performance and the efficiency structure hypotheses state that larger banks are more efficient than smaller banks (Bikker and Bos, 2008). Empirical studies of Berger (2003), Mester (2005), Wheelock and Wilson (2012) lend support to the statement in developed countries. However, not much empirical literature focuses on small developing economies such as Vietnam to show that bank size is associated with increased risk, especially credit risk. The study’s empirical results show that size enlargement is not positively associated with risk-adjusted efficiency. Input waste, output shortage and risk surplus of big banks are nearly three times higher than those of small banks. The results are robust under constant and variable returns to scale for production technologies.

Complementarities as an Antitrust Defense

We employ a Cournot model with interdependent demands to explore the interaction between demand and cost complementarities in mitigating upward pricing pressure, post-merger. The analysis reveals that even substantial increases in the HHI post-merger need not raise competitive concerns when output is redistributed from single-market to multi-market providers. Furthermore, the numerical simulations indicate that there is a wide range of demand and cost complementarity parameters over which even monopolization of the market would not be expected to result in higher prices. These findings may constructively inform merger policy and provide useful context for application of the DOJ/FTC horizontal merger guidelines in an increasingly digitalized economy.

Sourcing product quality for foreign market entry

This study employs a differentiated Cournot model with both horizontal and vertical product differentiation. It scrutinizes the implications of frictions over manufacturing high quality (upstream market power) on the endogenous foreign market entry mode and product quality choice. Both high-quality exports and subsidiary sales require high-quality inputs supplied by a monopoly upstream firm, and thus are costly. Relative product quality, product substitutability, and product-specific trade costs are the key for the variation in input/output prices, sales and the markup between an exporter and a multinational, and have significant trade policy implications for high-quality exports and subsidiary sales.

Equilibrium Further Studied for Combined System of Cournot and Bertrand: A Differential Approach

In general, quantity competition and price competition exist simultaneously in a dynamic economy system. Whether it is quantity competition or price competition, when there are more than three companies in one market, the equilibrium points will become chaotic and are very difficult to be derived. This paper considers generally dynamic equilibrium points of combination of the Bertrand model and Cournot model. We analyze general equilibrium points of the Bertrand model and Cournot model, respectively. A general equilibrium point of the combination of the Cournot model and Bertrand model is further investigated in two cases. The theory of spatial agglomeration and intermediate value theorem are introduced. In addition, the stability of equilibrium points is further illustrated on celestial bodies motion. The results show that at least a general equilibrium point exists in combination of Cournot and Bertrand. Numerical simulations are given to support the research results.

Environmental Governance Cooperative Behavior among Enterprises with Reputation Effect Based on Complex Networks Evolutionary Game Model.

This paper first portrays the equilibrium payoff of enterprise’s cooperation of environmental governance based on the Cournot model. Secondly, the evolutionary game model in complex networks is adopted to depict the evolution of environmental governance cooperative behavior among enterprises. Further, the evolutionary process of environmental governance cooperative behavior of enterprises is simulated considering the supervision behavior of government and the reputation evaluation behavior of environmental social organization. The results show that the cooperation level of enterprise group under self-organization condition will reach a low level; the supervision of government can enhance the cooperation level of enterprise group with high betrayal tempatation while it has limited effect on enterprise group with low betrayal tempatation. The reputation evaluation behavior of environmental social organization can realize reputation effect to improve the the cooperation level of enterprise group with high betrayal tempatation. The enhance of reputation sensitivity can optimize equilibrium distribution of reputation and it can strengthen the reputation effect on cooperation level. Based on the analysis above, the suggestions to effectively improve cooperation level are given.

On the Equilibrium Uniqueness in Cournot Competition with Demand Uncertainty

AbstractWe revisit the linear Cournot model with uncertain demand that is studied in Lagerlöf (2006. “Equilibrium Uniqueness in a Cournot Model with Demand Uncertainty.” The B.E. Journal of Theoretical Economics 6, no. 1. (Topics), Article 19: 1–6.) and provide sufficient conditions for equilibrium uniqueness that complement the existing results. We show that if the distribution of the demand intercept has the decreasing mean residual demand (DMRD) or the increasing generalized failure rate (IGFR) property, then uniqueness of equilibrium is guaranteed. The DMRD condition implies log-concavity of the expected profits per unit of output without additional assumptions on the existence or the shape of the density of the demand intercept and, hence, answers in the affirmative the conjecture of Lagerlöf (2006. “Equilibrium Uniqueness in a Cournot Model with Demand Uncertainty.” The B.E. Journal of Theoretical Economics 6, no. 1. (Topics), Article 19: 1–6.) that such conditions may not be necessary.

Analysis of Optimal Strategies in a Two-Echelon Digital Products Supply Chain Considering Consumer Types

Considering that the consumers are heterogeneous, we analyze pricing and investment strategies in a two-echelon supply chain of digital products which comprises a manufacturer and a retailer. Firstly, we construct demand function of digital product based on the consumer types by introducing product quality. Three different supply chain models are considered: vertical integration model, Cournot model, and manufacturer Stackelberg model. We study the players’ optimal strategies under these three models and focus on analyzing the effects of the players’ power balance on equilibrium optimal pricing and investment. We find the aggregated profits of both sides and investment cost are the highest in vertical integration model. The price of the digital product is the lowest in vertical integration model in most cases, as the customers hope. Finally, we offer managerial implications and direct the further work.

A duopolistic game for designing a comprehensive energy-efficiency scheme regarding consumer features: Which energy policy is the best?

Governments design energy-efficiency programs (EEPs) to reduce the energy consumption of the energy-intensive sectors. In this paper, we propose a comprehensive EEP for the industrial and household sectors as a multi-agent problem. A sustainable supply chain consisting of an energy supplier, an energy-efficient manufacturer, and a conventional manufacturer is considered on this matter in a duopoly. Some energy policies under direct, indirect, and combined intervention are applied by the government to improve the cost-effectiveness of the program. In addition, the authors investigate the rebound effects of energy consumption in both sectors, under the consumer behavioral intentions i.e., the efficiency-related awareness, loyalty, and income level as a novel contribution. A multi-stage model is extended based on Cournot model to formulate the problem. The scenarios’ comparison and sensitivity analysis of the equilibrium decisions indicate that energy financial policies (e.g., energy tariff) encourage the manufacturers to follow the energy-efficiency path upon their high-energy-consuming products and processes. The combined intervention is more effective than the unilateral policies to reduce energy intensity and increase the energy-saving and social welfare of the industrial and household sectors, respectively. The industrial tariff also seems to be more powerful policy than consumer tariff and energy-efficiency awareness to satisfy the investigated energy-related targets. Finally, the present study provides a management point of view of a sustainable supply chain for energy policy-makers.

Juegos con utilidades multidimensionales y responsabilidad social de las empresas

This paper provides an innovative analysis of strategic models with multidimensional util- ities. A wide range of problems of economic nature can be modeled more realistically by this setting, in which several objectives must be taken into account. The traditional treatment of economic models is characterized by the principle of individual rationality. However, the evidence shows that people do follow not only their own interests, but also they often worry about the welfare of others. We analyse Cournot's model of oligopoly by considering a vector utility function and with a perspective of the firm based on principles of social responsibility. We conclude that firms can achieve equilibria in which the social cost is reduced.

Analysis of the Social Welfare Effect of Environmental Regulation Policy Based on a Market Structure Perspective and Consumer

With the implementation of regulatory policies, some new problems are emerging, such as uneven governance effects, large differences in economic growth, and social welfare inequalities. In order to promote the sustainable development of both the economy and the environment, it is necessary to provide theoretical explanations for the above phenomena. Thus, this paper constructs a theoretical model of social welfare effects based on the Cournot model. Additionally, the scenario analysis method is used to analyze the social welfare effects of environmental control policies from the perspective of market structure and consumer preferences. The findings of the scenario analysis are as follows: (1) the social welfare effect of environmental subsidy policy is greater than the social welfare effect of environmental tax policy when the absolute difference between the external value of environmentally friendly goods and non-environmental goods is less than 7.4 units and (2) the implementation of environmental subsidy policies or environmental tax policies will improve social welfare when the market structure is a completely competitive market and when both of the externalities of environmentally friendly commodities and non-environmental commodities are not the same at intervals (0, 0.335) and (−0.335, 0). We conclude that (1) the government should consider externalities, market powers, and consumer preferences when implementing environmental regulation policies and (2) the government can achieve a trend toward the development of environmentally friendly goods by guiding consumer preferences and harnessing market power.

Antidumping protection and welfare in a differentiated duopoly

This paper employs a two-country Cournot model to investigate the protection and welfare effects of an antidumping (AD) duty and a price-undertaking policy under different dumping measures (i.e., injury margin and dumping margin) in a differentiated duopoly. We show that the welfare levels of the host country and the world as a whole are lower under a price-undertaking policy than an AD-duty policy. However, the former is superior to the AD-duty policy in terms of protection. These results are robust even if the firms engage in Bertrand competition.

Mass Customization Enterprises’ Competitive Decisions Considering the Brand Effect

Compared with mass production (MP), mass customization (MC) can cater to consumers' preferences better and seize market share, but it also leads to cost premium. Especially in the competitive market, companies should consider the MC capabilities of the rival company when making decisions. Based on the traditional MC decision model, this paper analyzes the impact of MC on consumer utility from the perspective of brand value by introducing the brand effect; and quantitatively measures the cost premium by introducing product line cost. Besides, this paper considers the market equilibrium of the target enterprises with MC capability when their rival enterprises have different customization capabilities and gives the decision-making situation of the enterprise under different situations in the context of the Cournot model. Finally, this paper compares the consumer surplus and social welfare under different equilibrium and analyzes the impact of MC. We find that if the target company has the customization ability, it will gain a competitive advantage, and even squeeze the market out when the rival company is unable to carry out MC; if both companies have MC capability, the two enterprises may fall into prisoners' dilemma; the choice of MC is not necessarily conducive to the increase of consumer surplus, and the competition between the two MC companies may even lead to lower social welfare.

Mergers and Acquisitions, Local Labor Market Concentration, and Worker Outcomes

Thousands of establishments employing millions of workers change ownership each year, sometimes leading to large changes in local labor market concentration that potentially increase labor market power. Using matched employer-employee data from the U.S., this paper estimates the direct and indirect effects of mergers and acquisitions (M&As) and resulting local labor market concentration changes on worker outcomes. To measure local concentration, I derive an index of concentration that uses job-to-job mobility patterns to incorporate information on substitutability across industries. Causal effects are estimated using a matched difference-in-differences design and cross-sectional variation in the predicted impacts of M&As on local concentration. In mergers that have little impact on local labor market concentration, annual earnings for workers in M&A firms remain stable after the ownership change. In sharp contrast, earnings fall by 2 percent for M&A workers in mergers that increase local labor market concentration, with the largest effects in already concentrated markets. These patterns are similar in tradable industries, suggesting the effects are not driven by changes in product market power. Mergers generating the largest concentration changes also generate negative spillovers on other firms in the same labor market, with an implied elasticity of earnings with respect to local concentration equal to -0.22. Viewed through the lens of a standard Cournot model, the results imply local concentration depresses wages by about 4-5 percent relative to a fully competitive benchmark.