This chapter surveys existing results and lists nine future areas in the field of transferable utility (TU) oligopoly games, which are both theoretically interesting and empirically important. On the theory side, they make advances on the refinements and applications of the core, one of the most important solutions in cooperative game theory. On the empirical side, TU oligopoly games allow one to model and analyze industrial cooperation and help understand the forces behind industrial changes as well as the effects of regulatory policies.
Andrea Attar and Claude d’Aspremont
We cover some of the most prominent contributions to the literature of equilibrium refinements. We emphasize recent contributions as well as those concepts that have proven to satisfy the most comprehensive list of desirable properties.
Michael Kopel and Mario Pezzino
Ludovic A. Julien
Stackelberg games feature strategic interactions among rational agents in markets on which some hierarchical competition takes place. In this chapter we present three prototypes of deterministic non-cooperative Stackelberg games with increasing level of generality. The first is the basic duopoly game. The second is the multiple leader–follower game. The third extends the multiple leader–follower game within the framework of bilateral oligopoly to cover a multi-commodity market. In each case, we define and characterize the strategic equilibrium. In addition, we study the consequences of market power and the implications in terms of welfare. We also consider endogenous timing, merging and free entry. We also compare the Stackelberg equilibria with the corresponding Cournot equilibria and with the competitive equilibrium.
Paul Belleflamme and Martin Peitz
In many markets, user benefits depend on participation and usage decisions of other users, giving rise to network effects. Intermediaries manage these network effects and thus act as platforms that bring users together. This chapter reviews key findings from the literature on network effects and two-sided platforms. It lays out the basic models of monopoly platforms and platform competition, and elaborates on some routes taken by recent research.
This chapter provides a general survey of three strands of literature in oligoply theory. The first deals with the existence of Cournot equilibrium in the general asymmetric case, via the property of strategic substitutes. The second is concerned with the effects of exogenous entry by identical firms on market performance for a Cournot industry. The third strand deals with Bertrand competition with differentiated products as a game of strategic complements. These strands of literature share one important unifying common feature: they were achieved via the application of lattice-theoretic methods. The presentation style of this survey is precise but at the same time somewhat informal in that concepts and ideas are given precedence over formal proofs. In addition, illustrative examples are included whenever possible.
Jean J. Gabszewicz and Ornella Tarola
In this chapter, we survey some recent contributions analyzing oligopoly theory and product differentiation from the viewpoint of models of localized competition. In other words, we exclude from our analysis the field of monopolistic competition (see Thisse and Uschev, Chapter 5 in this Handbook) and oligopoly theory as in the neoclassical vein (Vives, 2000). We start by recalling some elements of the microeconomic theory of consumer demand based on characteristics, as introduced by Lancaster (1966). Then, we present successively the theory of horizontal product differentiation, based on the article by Hotelling (1929) and the theory of vertical product differentiation, based on the article by Gabszewicz and Thisse (1979). Then, we develop a model nesting both horizontal and vertical product differentiation (Gabszewicz and Wauthy, 2012). Finally, we propose two applications of this approach, one based on network externalities and the other on environmental economics.
Robert A. Ritz
This chapter provides a selective survey of recent developments in the study of social welfare under oligopoly. The main topics covered are (i) the rate of cost pass-through as a tool to analyze market performance; (ii) the quantification of welfare losses due to market power in Cournot-style models; and (iii) new results from models with endogenous entry. The chapter highlights common themes across these topics and identifies areas for future research.