On the Markovian efficiency of Bertrand and Cournot equilibria

We characterize and compare closed-loop (feedback) price and quantity strategies within a full-fledged dynamic model of oligopolistic competition in which production requires exploitation of a renewable productive asset. Unlike previous papers on the strategic exploitation of productive assets, we allow for im-perfect product substitutability, which enables us to deal with price competition. We show that the traditional result that the Bertrand equilibrium is more efficient than the Cournot equilibrium does not necessarily hold in a Markovian environment, either in the short-run or at the stationary equilibrium, or using the discounted sum of welfare as a criterion for relative efficiency.