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Schinkel, M., Herings, J., and Peeters, R. (2005). Intertemporal market division: A case of alternating monopoly. European Economic Review, 49(5):1207-1223.

  • Journal
    European Economic Review

In this paper, we report on an equilibrium with market dominance that exists in a simple two-firm model that features neither entry barriers nor sophisticated punishment strategies. This equilibrium induces an intertemporal market division in which the two firms alternate as monopolists ¿ despite the fact that the model also sustains a Cournot duopoly. Even when initially both firms are active in the market, the alternating monopoly reveals itself rather quickly. Moreover, it Pareto dominates the Cournot equilibrium ¿ as it is close to the cartel outcome. Several examples of what well may be such alternating monopolies are presented.