Price cap regulation under duopoly

This article captures price cap regulation under duopoly with game theory approaches. First, price cap regulation reduces price difference, output difference, and price dispersion under both Cournot and Stackelberg competition. Second, price cap regulation weakens the advantages of both costs and fi...

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Bibliographic Details
Published in:Managerial and decision economics 2023-04, Vol.44 (3), p.1376-1382
Main Authors: Nie, Pu‐yan, Wen, Hong‐xing, Wang, Chan
Format: Article
Language:English
Subjects:
Duopoly
Game theory
Profits
Regulation
Social welfare
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Summary:This article captures price cap regulation under duopoly with game theory approaches. First, price cap regulation reduces price difference, output difference, and price dispersion under both Cournot and Stackelberg competition. Second, price cap regulation weakens the advantages of both costs and first‐mover. Third, price cap regulation reduces firms' profits while promotes consumer surplus. Finally, the relationship between the social welfare and price cap regulation is an inverse U‐shape. Therefore, optimal price cap regulation exists.
ISSN:0143-6570
1099-1468
DOI:10.1002/mde.3766