Comparing Bertrand and Cournot Equilibria: A Geometric Approach

Abstract

By presenting a geometric analysis of a duopoly, this article attempts to provide some insights into recent results by Singh and Vives regarding Bertrand and Cournot equilibria and the relative dominance of price and quantity strategies. It shows that under fairly general and reasonable assumptions (a) Cournot equilibrium prices (quantities) are higher than Bertrand equilibrium prices (quantities) and (b) a quantity (price) strategy dominates a price (quantity) strategy if the goods are substitutes (complements).