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Dynamic Oligopoly with Inventories

Alan P. Kirman and Matthew J. Sobel
Econometrica
Vol. 42, No. 2 (Mar., 1974), pp. 279-287
Published by: The Econometric Society
DOI: 10.2307/1911978
Stable URL: http://www.jstor.org/stable/1911978
Page Count: 9
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Dynamic Oligopoly with Inventories
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Abstract

This paper develops a dynamic model of oligopoly and discusses the existence andcharacteristics of optimal policies for firms in such a model. The firms are assumed to face a random demand so they hold inventories which fluctuate from one period to the next. This necessitates a dynamic model rather than a static one. Our extension of the equilibrium concept to the oligopoly model is founded on recent generalizations of Shapley's stochastic game. We show the existence of equilibrium price-quantity strategies for the firms and also (i) an equilibrium strategy may be found by solving an appropriate static game and (ii) the quantity part of the strategy is often a constant (time invariant).

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