Strategic Adjustment Asymmetries*)

Abstract

In symmetric Cournot and Bertrand duopoly models, we show how responses to unforeseen demand shocks may be asymmetric in two ways: First, there can be (multiple) equilibria in which only one firm adjusts after the shock. Secondly, adjustments following positive and negative shocks differ, in the sense that both firms adjust fully to a positive shock, whereas one of the firms may choose not to adjust to a negative shock. Starting from a state of symmetry, it follows that strategies are more flexible upwards than downwards. These qualitative results on adjustment asymmetries hold generally and irrespective of whether firm choices are strategic substitutes or complements.

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Cite this paper

@inproceedings{Hansen2001StrategicAA, title={Strategic Adjustment Asymmetries*)}, author={Per Svejstrup Hansen}, year={2001} }