Price and Quantity Competition Revisited

By enlarging the parameter space originally considered by Singh and Vives (1984) to allow for a wider range of cost asymmetry, Zanchettin (2006) finds that the Singh and Vives result that firms always make larger profits under quantity competition than under price competition fails to hold. This paper shows that while profit ranking between price and quantity competition can be (partially) reversed the celebrated result by Singh and Vives that firms always choose a quantity contract in a two-stage game continues to hold in the enlarged parameter space.