Inventories and Endogenous Stackelberg Leadership in Two-period Cournot Oligopoly

Posted by D. Daniel Sokol

Sebastien Mitraille (Universite de Toulouse, Toulouse Business School) and Michel Moreaux (Toulouse School of Economics (IDEI and LERNA) discuss Inventories and Endogenous Stackelberg Leadership in Two-period Cournot Oligopoly

ABSTRACT: Two-period Cournot competition between n identical firms producing at constant marginal cost and able to store before selling has pure strategy Nash-perfect equilibria, in which some firms store to exert endogenously a leadership over rivals. The number of firms storing balances market share gains, obtained by accumulating early the output, with losses in margin resulting from increased sales and higher operation costs. This number and the industry inventories are non monotonic in n. Concentration (HHI) and aggregate sales increase due to the strategic use of inventories.