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On the effects of entry in Cournot markets

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  • AMIR, Rabah

    ()
    (Department of Economics, University of Southern Danemark, Denmark)

  • LAMBSON, Val

    ()
    (Department of Economics, Brigham Young University, USA)

Abstract

In the framework of symmetric Cournot oligopoly, this paper provides two minimal sets of assumptions on the demand and cost functions that imply respectively that, as the number of firms increases, the minimal and maximal equilibria lead to (i) decreasing industry price and increasing or decreasing per-firm output; and (ii) increasing industry price (and decreasing per-firm output). In both cases, per-firm profits are decreasing. The analysis relies crucially on lattice-theoretic methods and yields general, unambiguous and easily interpretable conclusions of a global nature. As a byproduct of independent interest, new insight into existence of Cournot equilibrium is developed.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1999059.

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Date of creation: 01 Nov 1999
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Handle: RePEc:cor:louvco:1999059

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Related research

Keywords: Cournot oligopoly; quasi-competitiveness; supemodular games; equilibrium comparative statics.;

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  1. Kandori, M. & Mailath, G.J., 1991. "Learning, Mutation, And Long Run Equilibria In Games," Papers 71, Princeton, Woodrow Wilson School - John M. Olin Program.
  2. Novshek, William, 1980. "Cournot Equilibrium with Free Entry," Review of Economic Studies, Wiley Blackwell, vol. 47(3), pages 473-86, April.
  3. Cox, James C. & Walker, Mark, 1998. "Learning to play Cournot duopoly strategies," Journal of Economic Behavior & Organization, Elsevier, vol. 36(2), pages 141-161, August.
  4. Milgrom, Paul & Roberts, John, 1994. "Comparing Equilibria," American Economic Review, American Economic Association, vol. 84(3), pages 441-59, June.
  5. AMIR , Rabah, 1995. "Continuous Stochastic Games of Capital Accumulation with Convex Transition," CORE Discussion Papers 1995009, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Milgrom, Paul & Shannon, Chris, 1994. "Monotone Comparative Statics," Econometrica, Econometric Society, vol. 62(1), pages 157-80, January.
  7. Rosenthal, Robert W, 1980. "A Model in Which an Increase in the Number of Sellers Leads to a Higher Price," Econometrica, Econometric Society, vol. 48(6), pages 1575-79, September.
  8. Novshek, William., 1984. "On the Existence of Cournot Equilibrium," Working Papers 517, California Institute of Technology, Division of the Humanities and Social Sciences.
  9. Vives, Xavier, 1990. "Nash equilibrium with strategic complementarities," Journal of Mathematical Economics, Elsevier, vol. 19(3), pages 305-321.
  10. Kohlberg, Elon & Mertens, Jean-Francois, 1986. "On the Strategic Stability of Equilibria," Econometrica, Econometric Society, vol. 54(5), pages 1003-37, September.
  11. AMIR, Rabah, 1994. "Cournot Oligopoly and the Theory of Supermodular Games," CORE Discussion Papers 1994013, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Robson, Arthur J, 1990. "Stackelberg and Marshall," American Economic Review, American Economic Association, vol. 80(1), pages 69-82, March.
  13. Seade, Jesus K, 1980. "On the Effects of Entry," Econometrica, Econometric Society, vol. 48(2), pages 479-89, March.
  14. Novshek, William, 1984. "Finding All n-Firm Cournot Equilibria," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 61-70, February.
  15. Seade, Jesus, 1980. "The stability of cournot revisited," Journal of Economic Theory, Elsevier, vol. 23(1), pages 15-27, August.
  16. Roberts, John & Sonnenschein, Hugo, 1976. "On the existence of Cournot equilbrium without concave profit functions," Journal of Economic Theory, Elsevier, vol. 13(1), pages 112-117, August.
  17. Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-77, November.
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