Existence, Uniqueness, and Symmetry of Free-Entry Cournot Equilibrium: The Importance of Market Size and Technoligy Choice
This article adds technology choice to a free-entry Cournot model with linear demand and constant marginal costs. Firms can choose from a discrete set of technologies. This simple framework yields non-existence of equilibrium, existence of multiple equilibria and equilibria in which ex-ante indentical firms choose different technoligies as possible outcomes. I provide a full characterization of the parameter sets for which these outcomes arise. The (non)-existence problem disappears if vertical market size is large. Non-existence is largely a ´small number´phenemenon. Asymetric equilibria emerge either because of indivisibilities or due to similarity of different technologies in terms of the average costs realized.
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