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On a foundation for Cournot equilibrium

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  • Alex Dickson
  • Roger Hartley

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.
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Suggested Citation

  • Alex Dickson & Roger Hartley, 2006. "On a foundation for Cournot equilibrium," Economics Discussion Paper Series 0638, Economics, The University of Manchester.
    • Handle: RePEc:man:sespap:0638
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    File URL: http://hummedia.manchester.ac.uk/schools/soss/economics/discussionpapers/EDP-0638.pdf
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    References listed on IDEAS

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    1. Szidarovszky, F & Yakowitz, S, 1977. "A New Proof of the Existence and Uniqueness of the Cournot Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(3), pages 787-789, October.
    2. A. Dickson & R. Hartley, 2005. "The strategic Marshallian cross and bilateral oligopoly," Economics Discussion Paper Series 0523, Economics, The University of Manchester.
    3. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, December.
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    More about this item

    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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