Private Information, Strategic Behavior, and Efficiency in Cournot Markets
AbstractWhen analyzing a Cournot market with strictly convex costs dependent on a private information parameter, do we err more by ignoring market power or by ignoring the impact of incomplete information? Is the welfare loss at the market outcome driven by private information or by market power? The answer to both questions is that in large enough markets, abstracting from market power provides a much better approximation than abstracting from private information. Let n index the size of the market and the (free entry) number of firms. Then the effect of market power (private information) is of the order of 1/n (1/√n) for prices and 1/n
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Bibliographic InfoArticle provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 33 (2002)
Issue (Month): 3 (Autumn)
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- Davidson, Carl & Mukherjee, Arijit, 2007. "Horizontal mergers with free entry," International Journal of Industrial Organization, Elsevier, vol. 25(1), pages 157-172, February.
- Iván Major, 2006. "Why do (or do not) banks share customer information? A comparison of mature private credit markets and markets in transition," IEHAS Discussion Papers 0603, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences, revised 24 Apr 2006.
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