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This paper develops a dynamic model of oligopoly and discusses the existence and characteristics of optimal policies for firms in such a model. The firms are assumed to face a random demand so they hold inventories which fluctuate from one period to the next. This necessitates a dynamic model rather than a static one. Our extension of the equilibrium concept to the oligopoly model is founded on recent generalizations of Shapley's stochastic game. We show the existence of equilibrium price-quantity strategies for the firms and also (i) an equilibrium strategy may be found by solving an appropriate static game and (ii) the quantity part of the strategy is often a constant (time invariant).
Kirman et al. (Fri,) studied this question.