Capital Precommitment and Competition in Supply Schedules

Although the Cournot and Bertrand equilibrium concepts have economic analysis of oligopoly problems, neither has a theoretical rationale. However, notions of capacity have been used to rationalize the Cournot equilibrium. the same time, the idea of competition in supply schedules under has been used by Klemperer and Meyer to derive an concept intermediate between Cournot and Bertrand. In paper, we combine these two approaches and show that under the of Cobb-Douglas technology and constant elasticity , an equilibrium in markups can result.