Contest vs. Competition in Cournot Duopoly: Schaffer's Paradox
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arXiv
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| Main Authors: | , , |
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| Format: | Preprint |
| Published: |
2025
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| _version_ | 1866912563134988288 |
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| author | Amir, Rabah Evstigneev, Igor V. Zhitlukhin, Mikhail V. |
| author_facet | Amir, Rabah Evstigneev, Igor V. Zhitlukhin, Mikhail V. |
| contents | The paper compares two types of industrial organization in the Cournot duopoly: (a) the classical one, where the market players maximize profits and the outcome of the game is a Cournot-Nash equilibrium; (b) a contest in which players strive to win a fixed prize/bonus employing unbeatable strategies. Passing from (a) to (b) leads to a perfect competition with zero profits of the players (Schaffer's paradox). Transition from (b) to (a) results in a substantial decline in the production output, which also seems paradoxical, as it is commonly accepted that competition increases efficiency. We examine these phenomena in two versions of the Cournot model: with a homogeneous good and with differentiated goods. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2509_00960 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Contest vs. Competition in Cournot Duopoly: Schaffer's Paradox Amir, Rabah Evstigneev, Igor V. Zhitlukhin, Mikhail V. General Economics Economics The paper compares two types of industrial organization in the Cournot duopoly: (a) the classical one, where the market players maximize profits and the outcome of the game is a Cournot-Nash equilibrium; (b) a contest in which players strive to win a fixed prize/bonus employing unbeatable strategies. Passing from (a) to (b) leads to a perfect competition with zero profits of the players (Schaffer's paradox). Transition from (b) to (a) results in a substantial decline in the production output, which also seems paradoxical, as it is commonly accepted that competition increases efficiency. We examine these phenomena in two versions of the Cournot model: with a homogeneous good and with differentiated goods. |
| title | Contest vs. Competition in Cournot Duopoly: Schaffer's Paradox |
| topic | General Economics Economics |
| url | https://arxiv.org/abs/2509.00960 |