Comparative statics in Cournot free entry equilibrium
AbstractIn this paper we study the effects of a change in an exogenous variable (the fixed cost or a parameter in the demand function) on the output and the number of active firms in a Symmetric Cournot Equilibrium with Free Entry (SCEFE). The results obtained here are different from those obtained in the Cournot model with a given number of firms. In particular, an increase in demand might yield a decrease in the output of the industry.We also show that any observation on prices, profits and number of firms is compatible with the assumption that the market is in a SCEFE. If fixed costs can be observed, there is a loose relationship between the profit rate and the number of active firms. This result is used as a warning against the use of the profit rate as a measure of an anticompetitive position and against the StructureâConductâ Performance paradigm.
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Bibliographic InfoArticle provided by Elsevier in its journal Mathematical Social Sciences.
Volume (Year): 44 (2002)
Issue (Month): 2 (November)
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Web page: http://www.elsevier.com/locate/inca/505565
Other versions of this item:
- Corchón, Luis C. & Fradera, I., . "Comparative Statics in Cournot Free Entry Equilibrium," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/3854, Universidad Carlos III de Madrid.
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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