V.- CONCLUSIONS.
In this paper I have tried to integrate several models -some of them very
much used in Industrial Organization and Welfare Economics- and to show that
the qualitative properties of comparative statics of these models conform with
our intuition as long as i) the game is a market game and ii) a strong
concavity condition, which implies strategic substitution, is met. This is
because in our case the combination of i) and ii) above implies that the best
reply function is a contraction mapping: uniqueness and "right" comparative
statics properties follow from that.
It would be very nice if it could be shown that the qualitative
properties of models of strategic substitutes and strategic complements are
similar, i.e. that a raise in taxes always decreases total output and
increases prices. If this were the case we would not need to worry about which
model is the right one, since both would yield the same qualitative
predictions. This would alleviate the long-standing polemic between supporters
of quantity-setting models (Cournot) and price-setting models (Bertrand).
However, the case of strategic complements presents greater difficulties and
might require different methods. First, an additional assumption is needed in
order to guarantee that the best reply function is a contraction (see e.g.
Friedman (1982) p. 504, assumption 6). Second, in the case of entry, it is not
clear how to model the price of a firm which is not in the market. And third,
unless additional assumptions are made, the game is not a market game.
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