A Note on Price and Quantity Competition in Differentiated Oligopolies

Abstract

In this note we show that the results developed in N. Singh and X. Vives (1984, Rand J. Econ.15, 546-554) are sensitive to the duopoly assumption. If there are more than two firms, prices may be higher under price competition than under quantity competition. This will be the case if quality differences are large and goods are complements. If goods are substitutes, high-quality firms may earn higher profits under price competition than under quantity competition. Hence, it is not evident which kind of competition is more efficient. Journal of Economic Literature Classification Numbers: D43, L13. © 2000 Academic Press.