Multiple leader oligopolistic market equilibrium analysis under the uncertainty of the strategy

Abstract

The distinguishing feature that sets oligopoly apart from competition and from monopoly is that oligopolists are strategically linked to one another. This thesis studies multiple leader situation under the uncertainty of rival leaders`` strategies. ``Strategy (b)``, a new strategy which is inbetween the Nash strategy and the Stackelberg strategy is proposed. It is shown empirically, but not analytically that the firm which uses strategy (b) could get more profit than the firm which uses the pure Nash strategy or the pure Stackelberg strategy. This conjecture needs more study. Under the some regularity assumption, the existence of equilibrium between leaders under strategy (b) is shown. Under the resulting equilibrium, more industry output but less profits to individual firms are attained than those of Nash equilibrium. So each leader is confronted with, so called, Prisoners`` Dilemma. Next, the solution procedure which considers the general multiple leder and multiple follower situation is proposed.