Mathematical Analysis of the Interactions Between Oligopolistic Firms and a Competitive Fringe

SYNOPTIC ABSTRACT

This paper examines a market structure in which a few major firms form an oligopoly and coexist with several smaller firms (a competitive fringe) which behave as if the market is perfectly competitive. We consider the existence, uniqueness and computation of Nash-Cournot equilibria for follower-follower as well as leader-follower models of this market. An interesting fact emerges: an oligopolist may make less profit as a leader than as a follower.

Key Words and Phrases:

• oligopolies and competitive fringe
• Nash-Cournot equilibria
• Stackelberg's leader-follower analysis