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With few exceptions, the literature on the role of capacity as a strategic entry deterrent has assumed Cournot competition in the post-entry game. In contrast, our model is in the spirit of Kreps and Scheinkman (1983): the incumbent and entrant sequentially precommit to capacity levels before competing in price. Interesting deterrence effects arise because firms need time to build, i.e. cannot adjust capacity instantaneously in the post-entry game. Depending on the sizes of the fixed set-up cost, the cost of capacity and the relative costs of production, our model produces a wide spectrum of equilibrium behaviors. Using a "reverse-judo" tactic a cost disadvantaged incumbent may limit his capacity to induce the entrant to respond less aggressively. When the incumbent is equally or more efficient, a stochastic version of Gelman and Salop's (1983) judo equilibrium may arise. Entry accommodation can also result in the Stackelberg outcome, or the equilibria from Dixit's (1980) quantity-setting game. In contrast to much previous work, we find that when entry is deterred the incumbent may hold idle capacity.Our model thus provides a unified framework in which several equilibrium phenomena previously suggested in the literature appear as special cases, while at the same time suggesting some new ones. Furthermore, it generates clear predictions about the circumstances under which these different outcomes are likely to occur.

This paper characterizes the set of NASH equilibria in a price setting duopoly in which firms have limited capacity, and in which unit costs of production up to capacity may differ. Assuming concave revenue and efficient rationing, we show that the case of different unit costs involves a tractable generalization of the methods used to analyze the case of identical costs. However, the supports of the two firms' equilibrium price distributions need no longer be connected and need not coincide. In addition, the supports of the equilibrium price distributions need no longer be continuous in the underlying parameters of the model. Two applications of our characterization are pursued. In the Kreps-Scheinkman model of capacity choice followed by Bertrand-Edgeworth price competition we show that, unlike in the case of identical costs, Cournot equilibrium capacity levels need not arise as subgame-perfect equilibria. The low-cost firm has greater incentive to price its rival out of the market than exists under Cournot behavior. Our second application is to the analysis of the effects of tariffs and quotas in a model in which a domestic market is supplied by a price setting duopoly consisting of a domestic and a foreign firm. We obtain a strong nonequivalence result.

Mais c'est a l'occasion du projet de flamandisation de l'universite de Gand qu'eclata notre grande querelle. Que dans cette Belgique a majorite flamande, une universite au moins le ffit n'etait pas pour m'indigner. Je refusai done, a }'indignation de rna famille et de mes camarades d'universite, de participer au cortege de protestation ou defila toute Ia grande bourgeoisie, grossie de Ia petite, comme toujours fidele a Ia supporter. Refus que mes parents tenterent de camoufler en empechement de sante, tant ils avaient honte de rna defection. J'eus Ia lachete de me preter a cette excuse qui ne trompa personne. II est vrai que, repugnant a manifester avec Ia bourgeoisie fransquillonne, je n'eusse pas ete davantage a Ia fete parmi ses ennemis, energumenes barbus, chevelus, ecumants, hurleurs, qui s'en donnaient a coeur joie de cracher sur les belles dames de la Coupure ou de Ia rue des Baguettes et leurs pretentieuses peronnelles.

In a vertically differentiated durable goods duopoly, prices tend to decline over time because the high-quality manufacturer's future product may compete more directly with the other firm's present product than with its own. This removes the standard reason not to cut prices (Stokey, 1979). Price levels depend not only on the similarity of the two products, but also on how readily the low-quality manufacturer's customers abstain from purchasing in order to obtain the high-quality good at a reduced price in the future. When quality choice is endogenized, substantially less vertical differentiation arises than would occur for nondurables.

We consider a two-stage game in which firms simultaneously select prices and capacities (or equivalently, outputs). Then, a random number of consumers attend the market, and each consumer selects a firm to visit. Consumers know all prices and quantities but not the realization of aggregate demand. The probability of being served at any firm depends on its capacity and the mixed strategy chosen by consumers. Consumers distribute themselves across firms so as to equalize the utility of each price-service pair. We show that there exists at most one equilibrium in which firms choose pure strategies, and characterize the "candidate" equilibrium. Consumers face a probability of being rationed, firms may have excess inventory, and the price remains above marginal cost. When there are many firms, the candidate is shown to be an equilibrium.

) and Shaked and Sutton (1982). Finally, despite the fact that the equilibrium concept is open-loop, all but the introductory price of the high quality good converge to marginal cost in the limit as firms can change prices arbitrarily frequently.

We consider a two-stage game in which firms simultaneously select prices and capacities (or equivalently, outputs). Then, a random number of consumers attend the market, and each consumer selects a firm to visit. Consumers know all prices and quantities but not the realization of aggregate demand. The probability of being served at any firm depends on its capacity and the mixed strategy chosen by consumers. Consumers distribute themselves across firms so as to equalize the utility of each price-service pair. We show that there exists at most one equilibrium in which firms choose pure strategies, and characterize the "candidate" equilibrium. Consumers face a probability of being rationed, firms may have excess inventory, and the price remains above marginal cost. When there are many firms, the candidate is shown to be an equilibrium.

This paper generalizes the Theorem of the Maximum (Berge, 1963) to allow for discontinuous changes in the domain and the objective function. It also provides a geometrical version of the (generalized) theorem.

This paper generalizes the Theorem of the Maximum (Berge, 1963) to allow for discontinuous changes in the domain and the objective function. It also provides a geometrical version of the (generalized) theorem.

L’article presente une analyse des origines et des elements determinants de la mobilisation spectaculaire de l’ete 1996, ainsi qu’un bilan provisoire des retombes de la Marche Blanche sur le fonctionnement du systeme politique belge. La Marche Blanche fut exceptionnelle et unique. Elle doit cette position unique non seulement a son origine – l’affaire Dutroux, qui se situait essentiellement au-dela de la politique – mais encore a certaines caracteristiques qui tiennent specifiquement a la culture politique belge. Largement mediatisee, l’affaire Dutroux deboucha sur une vague de protestation inedite. L’energie de la revolte fut canalisee dans une Marche Blanche de grande dignite dotee d’une signification politique marquee alors meme que son organisation, emanation d’une coalition de groupuscules locaux et recents, fut mise sur pied en 13 jours. La Marche n’a pas manque de faire impression sur l’elite politique du pays. A partir de ce constat, l’article montre comment les detenteurs du pouvoir firent des concessions des qu’ils sentirent que l’ordre public etait menace. Pourtant, un an a peine apres sa naissance, le role politique du « mouvement blanc » etait termine. Ainsi la signification politique de la Marche Blanche apparait-elle fortement liee a son epoque. Si l’ambiance prerevolutionnaire que le « mouvement blanc » reussit momentanement a creer lui assura un indeniable impact politique, elle ne donna pas davantage le jour a des organisations durables qu’a une nouvelle sociabilite ou a de nouvelles identites.