Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/93905
Authors: 
Reisinger, Markus
Ressner, Ludwig
Year of Publication: 
2007
Series/Report no.: 
SFB/TR 15 Discussion Paper 202
Abstract: 
This paper analyzes a duopoly model with stochastic demand in which firms first choose their strategy variable and compete afterwards. Contrary to the existing literature, we show that firms do not always choose a quantity which is the variable that induces a smaller degree of competition. The reason is that demand uncertainty and the degree of substitutability have countervailing effects on variable choice. Higher uncertainty favors prices, while closer substitutability favors quantities. Moreover, for intermediate values firms choose different strategy variables in equilibrium.
Subjects: 
competition
strategy variables
demand uncertainty
JEL: 
D43
L13
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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