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Survival in Cournot games

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  • Leoni, Patrick L.

Abstract

In a model that encompasses a general equilibrium framework, we consider a monopolist (a producer) with subjective beliefs that endogenously hedges against fluctuations in input prices in a complete market. We allow for entries and Cournot competition in this economy, and we study how erroneous beliefs affect long-run survival for those firms. We introduce a notion of entropy of beliefs, and we use it to characterize the class of beliefs for which the monopolist eventually disappears almost surely. When disappearance occurs, the whole market power switches to the entrant making the most accurate predictions in our sense. The class of beliefs for which survival occurs is much broader than that of perfectly competitive settings.

Suggested Citation

  • Leoni, Patrick L., 2013. "Survival in Cournot games," Journal of Mathematical Economics, Elsevier, vol. 49(5), pages 429-434.
    • Handle: RePEc:eee:mateco:v:49:y:2013:i:5:p:429-434
    DOI: 10.1016/j.jmateco.2013.05.003
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    References listed on IDEAS

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    1. Patrick Leoni, 2008. "Market power, survival and accuracy of predictions in financial markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 34(1), pages 189-206, January.
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