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A Nonparametric Analysis of the Cournot Model

Author

Listed:
  • Andrés Carvajal

    (CRETA and Department of Economics, University of Warwick)

  • John Quah

    (Department of Economics, Oxford University, Oxford)

Abstract

An observer makes a number of observations of an industry producing a homoge- neous good. Each observation consists of the market price, the output of individual firms and perhaps information on each firm's production cost. We provide vari- ous tests (typically, linear programs) with which the observer can determine if the data set is consistent with the hypothesis that firms in this industry are playing a Cournot game at each observation. When cost information is wholly or partially unavailable, these tests could potentially be used to derive cost information on the firms. This paper is a contribution to the literature that aims to characterize (in various contexts) the restrictions that a data set must satisfy for it to be consis- tent with Nash outcomes in a game. It is also inspired by the seminal result of Afriat (and the subsequent literature) which addresses similar issues in the context of consumer demand, though one important technical difference from most of these results is that the objective functions of firms in a Cournot game are not necessarily quasiconcave.

Suggested Citation

  • Andrés Carvajal & John Quah, 2009. "A Nonparametric Analysis of the Cournot Model," Economics Papers 2009-W15, Economics Group, Nuffield College, University of Oxford.
    • Handle: RePEc:nuf:econwp:0915
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    Cited by:

    1. Cherchye, Laurens & Demuynck, Thomas & De Rock, Bram, 2011. "Testable implications of general equilibrium models: An integer programming approach," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 564-575.

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    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • 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

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