Cournot and Bertrand equilibria under imperfect information (Q1077316)

This paper is concerned with the dual relation between Cournot and Bertrand equilibria under imperfect information, by using a nonsymmetric duopoly model with product differentiation and/or cost differences. The Cournot equilibrium is characterized as the Nash equilibrium in quantities and the Bertrand equilibrium as the one in prices. There exist two different sources of uncertainty in contrast to many current models, in which there is essentially one source of uncertainty except measurement errors. It is shown that the combined force of physical and stochastic interactions between the firms play a key role in measuring the value of additional information and in examining the incentives for revealing information. This paper also discusses the efficiency of Bertrand competition as compared with Cournot competition. The results obtained in this paper go beyond those of earlier papers such as Novshek and Sonnenschein, Clarke, Gal-Or, Sakai, and Vives. There are many directions in which one can further extend the analysis of the paper on the role of information in an oligopoly market.