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On a foundation for Cournot equilibrium

Author

Listed:
  • Alex Dickson

    (Keele University, Centre for Economic Research and School of Economic and Management Studies)

  • Roger Hartley

    (Department of Economics, University of Manchester)

Abstract

We show in the context of a bilateral oligopoly where all agents are allowed to behave strategically the unexpected result that when the number of buyers becomes large the outcomes in a strategic market game do not converge to those at the Cournot equilibrium. However, convergence to Cournot outcomes is restored if the game is sequential: sellers move simultaneously as do buyers, but the former always move before the latter. This suggests that the ability to commit to supply decisions is an essential feature of Cournot equilibrium.

Suggested Citation

  • Alex Dickson & Roger Hartley, 2007. "On a foundation for Cournot equilibrium," Keele Economics Research Papers KERP 2007/14, Centre for Economic Research, Keele University.
    • Handle: RePEc:kee:kerpuk:2007/14
    Note: Previously University of Manchester EDP 0638.
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    File URL: http://www.keele.ac.uk/depts/ec/wpapers/kerp0713.pdf
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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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