CAPITAL PRECOMMITMENT AND COMPETITION IN SUPPLY SCHEDULES

Although the Cournot and Bertrand equilibrium concepts have dominated economic analysis of oligopoly problems, neither has a compelling theo retical rationale. However,notions of capacity commitment have been us ed to rationalize the Cournot equilibrium. At the same time, the idea of competition in supply schedules under uncertainty has been used by Klemperer and Meyer to derive an equilibrium concept intermediate betw een Cournot and Bertrand, In this paper, we combine these two approach es and show that under the assumptions of Cobb-Douglas technology and constant elasticity demand, an equilibrium in markups can result.