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Cournot Oligopoly Under Strategic Uncertainty With Optimistic And Pessimistic Firms

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  • Fulvio Fontini

Abstract

In this paper the Cournot oligopoly under uncertainty is analyzed by means of the Choquet Expected Utility (CEU) theory. Firms are supposed to be either optimistic (CEU maximizers who hold concave capacities) or pessimistic (convex capacities). Reaction functions, equilibrium quantities, prices and profits are derived and compared for different degrees of uncertainty and uncertainty attitude (optimism or pessimism). It is proved that optimists make higher profits than pessimists whenever uncertainty is sufficiently low. If it is high just optimists participate in the market making losses. An interpretation of the main results in terms of the market's level of maturity is provided. Copyright Blackwell Publishing Ltd 2005.

Suggested Citation

  • Fulvio Fontini, 2005. "Cournot Oligopoly Under Strategic Uncertainty With Optimistic And Pessimistic Firms," Metroeconomica, Wiley Blackwell, vol. 56(3), pages 318-333, July.
  • Handle: RePEc:bla:metroe:v:56:y:2005:i:3:p:318-333
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    Cited by:

    1. Jürgen Eichberger & David Kelsey & Burkhard C. Schipper, 2009. "Ambiguity and social interaction," Oxford Economic Papers, Oxford University Press, vol. 61(2), pages 355-379, April.
    2. M. Caraballo & A. Mármol & L. Monroy & E. Buitrago, 2015. "Cournot competition under uncertainty: conservative and optimistic equilibria," Review of Economic Design, Springer;Society for Economic Design, vol. 19(2), pages 145-165, June.

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