Oligopoly, Uncertain Demand, and Forward Markets

Eldor, Rafi (Rafael); Zilcha, Itzhak

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Oligopoly, Uncertain Demand, and Forward Markets

Journal of Economics and Business, Vol. 42, 1990

10 Pages Posted: 1 Jan 2014 Last revised: 27 Jan 2014

See all articles by Rafi (Rafael) Eldor

Rafi (Rafael) Eldor

Interdisciplinary Center (IDC) Herzliya - Arison School of Business

Itzhak Zilcha

Tel Aviv University - Eitan Berglas School of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: January 11, 1990

Abstract

This paper analyzes the Nash equilibrium behavior of risk-averse oligopolistic firms under uncertain demand. It is shown that in the presence of unbiased forward markets the Nash Equilibrium (NE) output increases, that is, forward markets enhance competition. Unlike the competitive or monopoly cases, here the introduction of an unbiased forward market may result in a (unique) NE in which all the firms are worse off.

Keywords: Oligopoly, Forward Markets, Nash equilibrium

JEL Classification: G3, G13, G15

Suggested Citation: Suggested Citation

Eldor, Rafi (Rafael) and Zilcha, Itzhak, Oligopoly, Uncertain Demand, and Forward Markets (January 11, 1990). Journal of Economics and Business, Vol. 42, 1990, Available at SSRN: https://ssrn.com/abstract=2373461