We study a duopoly game in which firms commit to a batch technology before
competing in sales quantities. Adopting a batch technology requires the qua
ntity produced to equal an integer number of batches and allows sales to be
less than production. When larger batch sizes lower unit production costs
(as in the U.S. airline industry with its economics of density), subgame pe
rfect equilibrium sales quantities are unique and more competitive than the
Cournot equilibrium quantities of a one-shot game with continuous total co
st functions. When larger batch sizes yield higher unit costs, equilibrium
production can exceed equilibrium sales.