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Conjectures between Two Cournot Firms with Symmetric Information and Their Risk-taking Behaviours

Author

Listed:
  • Suyeol Ryu

    (Department of Economics, Andong National University)

  • Iltae Kim

    (Department of Economics, Chonnam National University)

Abstract

This paper introduces the simple and standard Cournot duopoly model in a symmetric situation in which each firm has the same information on the cost function of its rival. This paper considers two types of firms’ risk-taking behaviours and two classes of symmetric information. First, we consider that both firms are risk neutral and have perfect information. In this case, we obtain a unique Cournot equilibrium. Second, when both firms are risk neutral and have partial information, that is, each firm’s set of information changes from perfect to partial information, the number of equilibrium changes from one to four compared to case 1. Third, when both firms are risk averse and have perfect information, that is, firms’ risk taking behaviours change from risk neutral to risk averse, the number of equilibrium changes from one to three compared to case 1. Therefore, both firms’ information structure and risk taking behaviours affect their optimal output strategies.

Suggested Citation

  • Suyeol Ryu & Iltae Kim, 2017. "Conjectures between Two Cournot Firms with Symmetric Information and Their Risk-taking Behaviours," Malaysian Journal of Economic Studies, Faculty of Business and Economics, University of Malaya & Malaysian Economic Association, vol. 54(2), pages 223-234, December.
    • Handle: RePEc:mjr:journl:v:54:y:2017:i:2:p:223-234
    DOI: 10.22452/MJES.vol54no2.3
    as

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    More about this item

    Keywords

    Cournot equilibrium; risk aversion; risk neutrality; symmetric information;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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