Do oligopolistic firms benefit from being forced to act non-strategically?

Abstract

The present study seeks to answer the question of whether acting non-strategically can benefit firms. In a static Cournot framework, if a subset of firms are constrained to the equilibrium level of output, being non-strategic will have no impact on profits of neither constrained nor strategic firms and provided that sufficiently large number of firms are restricted, a marginal quantity contraction can be to their benefit. In contrast, using a dynamic Cournot framework, we find that the constraint set at the equilibrium level or moderately deviated from it, leads to increased profits for all firms irrespective of the number of non-strategic ones.