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A Nonparametric Analysis of the Cournot Model

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  • Andrés Carvajal

    ()
    (CRETA and Department of Economics, University of Warwick)

  • John Quah

    ()
    (Department of Economics, Oxford University, Oxford)

Abstract

An observer makes a number of observations of an industry producing a homoge- neous good. Each observation consists of the market price, the output of individual firms and perhaps information on each firm's production cost. We provide vari- ous tests (typically, linear programs) with which the observer can determine if the data set is consistent with the hypothesis that firms in this industry are playing a Cournot game at each observation. When cost information is wholly or partially unavailable, these tests could potentially be used to derive cost information on the firms. This paper is a contribution to the literature that aims to characterize (in various contexts) the restrictions that a data set must satisfy for it to be consis- tent with Nash outcomes in a game. It is also inspired by the seminal result of Afriat (and the subsequent literature) which addresses similar issues in the context of consumer demand, though one important technical difference from most of these results is that the objective functions of firms in a Cournot game are not necessarily quasiconcave.

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Bibliographic Info

Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2009-W15.

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Length: 30 pages
Date of creation: 24 Nov 2009
Date of revision:
Handle: RePEc:nuf:econwp:0915

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Web page: http://www.nuff.ox.ac.uk/economics/

Related research

Keywords: revealed preference; observable restrictions; linear programming; Cournot game; increasing marginal costs.;

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  1. Matzkin, Rosa L, 1991. "Axioms of Revealed Preference for Nonlinear Choice Sets," Econometrica, Econometric Society, Econometric Society, vol. 59(6), pages 1779-86, November.
  2. Donald J. Brown & Rosa L. Matzkin, 1995. "Testable Restrictions on the Equilibrium Manifold," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1109, Cowles Foundation for Research in Economics, Yale University.
  3. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, Elsevier, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier.
  4. Andrés Carvajal, 2003. "Testable Restrictions of Nash Equilibrium in Games with Continuous Domains," BORRADORES DE ECONOMIA, BANCO DE LA REPÚBLICA 003555, BANCO DE LA REPÚBLICA.
  5. Andrés Carvajal, 2010. "The testable implications of competitive equilibrium in economies with externalities," Economic Theory, Springer, Springer, vol. 45(1), pages 349-378, October.
  6. Francoise Forges & Enrico Minelli, 2006. "Afriat’s Theorem for General Budget Sets," CESifo Working Paper Series 1703, CESifo Group Munich.
  7. Sprumont, Yves, 2000. "On the Testable Implications of Collective Choice Theories," Journal of Economic Theory, Elsevier, Elsevier, vol. 93(2), pages 205-232, August.
  8. Indrajit Ray & Lin Zhou, . "Game Theory Via Revealed Preferences," Discussion Papers, Department of Economics, University of York 00/15, Department of Economics, University of York.
  9. Carvajal, Andres, 2004. "Testable restrictions on the equilibrium manifold under random preferences," Journal of Mathematical Economics, Elsevier, vol. 40(1-2), pages 121-143, February.
  10. Kubler, Felix, 2003. "Observable restrictions of general equilibrium models with financial markets," Journal of Economic Theory, Elsevier, Elsevier, vol. 110(1), pages 137-153, May.
  11. Carvajal, Andres & Ray, Indrajit & Snyder, Susan, 2004. "Equilibrium behavior in markets and games: testable restrictions and identification," Journal of Mathematical Economics, Elsevier, vol. 40(1-2), pages 1-40, February.
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Cited by:
  1. Cherchye, Laurens & Demuynck, Thomas & De Rock, Bram, 2011. "Testable implications of general equilibrium models: An integer programming approach," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 564-575.

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