Proceedings of the New York State Economics Association


A Peek into A Pandora's Box: Firm Level Demand with Price Competition versus Quantity Competition

William Kolberg

vol. 1, October 2008, p. 64-72


This paper explores the impact on firm-level demands under quantity competition tied to changes in the number of firms, product differentiation, and product group elasticity under price competition. It appears this deserves more attention. Some simple numerical analysis shows that inverse demand, compared with demand may be similar, more price elastic or less price elastic with increased competition beyond duopoly. Indeed, it appears increased competition may lead to the competitive result with quantity competition while under identical market conditions the result is monopolistic competitive under price competition, unless market demand is highly inelastic. The numerical results reported here suggest that the economic landscape containing the interesting dilemma in which price and quantity competition yield significantly different firm-level demands and different equilibria, may very well need to be expanded from competition among the few to include competition among the many as well.


suggested citation:

William Kolberg. "A Peek into A Pandora's Box: Firm Level Demand with Price Competition versus Quantity Competition." Proceedings of the New York State Economics Association. vol. 1, October 2008, p. 64-72

BibTeX entry    download