Consistent conjectures in globalization problems Chapter in Scopus uri icon

Abstract

  • © Springer Nature Switzerland AG 2019.We study the effects of merging two separate markets each originally monopolized by a producer into a globalized duopoly market. We consider a linear inverse demand with cap price and quadratic cost functions. After globalization, we find the consistent conjectural variations equilibrium (CCVE) of the duopoly game. Unlike in the Cournot equilibrium, a complete symmetry (identical cost functions parameters of both firms) does not imply the strongest coincident profit degradation. For the situation where both agents are low-marginal cost firms, we find that the company with a technical advantage over her rival has a better ratio of the current and previous profits. Moreover, as the rival becomes ever weaker, that is, as the slope of the rival¿s marginal cost function increases, the profit ratio improves.

Publication date

  • January 1, 2019