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Efficiency and surplus bounds in Cournot competition

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  • Anderson, Simon P.
  • Renault, Regis

Abstract

We derive bounds on the ratios of deadweight loss and consumer surplus to producer surplus under Cournot competition. To do so, we introduce a parameterization of the degree of curvature of market demand using the parallel concepts of ½-concavity and ½-convexity. The ”more concave” is demand, the larger the share of producer surplus in overall surplus, the smaller is consumer surplus relative to producer surplus, and the lower the ratio of deadweight loss to producer surplus. Deadweight loss over total potential surplus is at …rst increasing with demand concavity, then eventually decreasing. The analysis is extended to asymmetric …rm costs.
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Suggested Citation

  • Anderson, Simon P. & Renault, Regis, 2003. "Efficiency and surplus bounds in Cournot competition," Journal of Economic Theory, Elsevier, vol. 113(2), pages 253-264, December.
  • Handle: RePEc:eee:jetheo:v:113:y:2003:i:2:p:253-264
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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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