For a symmetric two-stage game, where firms first choose capacities, then compete in prices, Kreps and Scheinkman (Bell Journal of Economics, 1983, 14(2), pp. 326-337) prove that under efficient rationing the Nash equilibrium coincides with the Cournot equilibrium. We extend the model to include asymmetric costs and provide new results showing that the capacity choice game is dominance-solvable, just like the Cournot game. Further, we provide a simple sufficient condition, under which the dominance-solvable result extends to proportional rationing. The results provide new insights into the robustness of Cournot coincidence under alternate demand rationing schemes.

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Consumer Rationing and the Cournot Outcome
Jason J Lepore1
1California Polytechnic State University - San Luis Obispo, jlepore@calpoly.edu
Citation Information: The B.E. Journal of Theoretical Economics. Volume 9, Issue 1, Pages –, ISSN (Online) 1935-1704, DOI: 10.2202/1935-1704.1497, September 2009
Publication History:
- Published Online:
- 2009-09-08
Keywords: Bertrand-Edgeworth; demand rationing; Cournot; judo economics; capacity precommitment


















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