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Reconsidering Cournot: The Cournot Equilibrium is Consistent

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  • Andrew F. Daughety

Abstract

This article uses an infinite-regress model of firm-level decisions to find a rational expectations equilibrium for a duopoly and to relate concepts of conjectural variations and consistency to the Cournot equilibrium. The model derives a conjectural variation instead of assuming it. In particular, the Cournot equilibrium is shown to be consistent in the usual sense of the literature. The conflict between notions of consistent conjectures and the Cournot equilibrium results from a compounding problem inherent in the earlier models. We extend these results to the n-firm problem. Alternatively, the article can be viewed as providing a purely static model that generates the Cournot equilibrium without reference to conjectures or quasi dynamics.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 16 (1985)
Issue (Month): 3 (Autumn)
Pages: 368-379

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Handle: RePEc:rje:randje:v:16:y:1985:i:autumn:p:368-379

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Cited by:
  1. Theo Offerman & Jan Potters & Joep Sonnemans, 2002. "Imitation and Belief Learning in an Oligopoly Experiment," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 973-997.
  2. Clemens Haftendorn, 2012. "Evidence of Market Power in the Atlantic Steam Coal Market Using Oligopoly Models with a Competitive Fringe," Discussion Papers of DIW Berlin 1185, DIW Berlin, German Institute for Economic Research.
  3. Theo Offerman & Jan Potters & Joep Sonnemans, 1997. "Imitation and Belief Learning in an Oligopoly Experiment," Tinbergen Institute Discussion Papers 97-116/1, Tinbergen Institute.
  4. Drago, Robert & Turnbull, Geoffrey K., 1996. "On the incidence of profit sharing," Journal of Economic Behavior & Organization, Elsevier, vol. 31(1), pages 129-138, October.
  5. Corts, Kenneth S., 1998. "Conduct parameters and the measurement of market power," Journal of Econometrics, Elsevier, vol. 88(2), pages 227-250, November.
  6. Andrew F. Daughety, 2006. "Cournot Competition," Vanderbilt University Department of Economics Working Papers 0620, Vanderbilt University Department of Economics.
  7. Fischer, Carolyn, 2011. "Market power and output-based refunding of environmental policy revenues," Resource and Energy Economics, Elsevier, vol. 33(1), pages 212-230, January.
  8. Friedman, James W. & Mezzetti, Claudio, 2002. "Bounded rationality, dynamic oligopoly, and conjectural variations," Journal of Economic Behavior & Organization, Elsevier, vol. 49(3), pages 287-306, November.
  9. repec:dgr:uvatin:2097116 is not listed on IDEAS
  10. Sherrill Shaffer, 2008. "Earnings Valuation And Sources Of Growth," CAMA Working Papers 2008-32, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  11. Kamerschen, David R. & Klein, Peter G. & Porter, David V., 2005. "Market structure in the US electricity industry: A long-term perspective," Energy Economics, Elsevier, vol. 27(5), pages 731-751, September.
  12. Orlando I. Balboa & Andrew F. Daughety & Jennifer F. Reinganum, 2001. "Market Structure and the Demand for Free Trade," Vanderbilt University Department of Economics Working Papers 0112, Vanderbilt University Department of Economics, revised Dec 2002.
  13. Bakucs, Lajos Zoltan & Ferto, Imre & Hockmann, Heinrich & Perekhozhuk, Oleksandr, 2009. "Market power on the edge? An analysis of the German and Hungarian hog markets," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 58(8).
  14. Voneki, Eva & Hockmann, Heinrich, 2009. "Price distortions on the Hungarian raw milk market," 2009 Conference, August 16-22, 2009, Beijing, China 51673, International Association of Agricultural Economists.

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