Intertemporal Market Division: A Case of Alternating Monopoly

P.J.J. Herings; R.J.A.P. Peeters; M.P. Schinkel

doi:10.1016/j.euroecorev.2003.09.001

Intertemporal Market Division: A Case of Alternating Monopoly

P.J.J. Herings^*, R.J.A.P. Peeters, M.P. Schinkel

^*Corresponding author for this work

Research output: Contribution to journal › Article › Academic › peer-review

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Abstract

In this paper, we report on an equilibrium with market dominance that exists in a simple two-firm model that features neither entry barriers nor sophisticated punishment strategies. This equilibrium induces an intertemporal market division in which the two firms alternate as monopolists – despite the fact that the model also sustains a cournot duopoly. Even when initially both firms are active in the market, the alternating monopoly reveals itself rather quickly. Moreover, it pareto dominates the cournot equilibrium – as it is close to the cartel outcome. Several examples of what well may be such alternating monopolies are presented.

Original language	English
Pages (from-to)	1207-1223
Journal	European Economic Review
Volume	49
Issue number	5
DOIs	https://doi.org/10.1016/j.euroecorev.2003.09.001
Publication status	Published - 1 Jan 2005

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10.1016/j.euroecorev.2003.09.001

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