Equilibrium uniqueness in the Cournot model Consider an oligopoly with n firms that produce homogeneous goods andcompete
Question:
Equilibrium uniqueness in the Cournot model
Consider an oligopoly with n firms that produce homogeneous goods and compete à la Cournot. Inverse demand is given by P (Q) with P? (Q) i (qi) with C²i (qi) > 0 and C² (qi) ? 0. Denote q-i = ?j ? I qj.
1. Compute the first- and second order condition of firm i. Under which conditions is the profit function of firm i, ?i, strictly concave?
2. Compute the slope of the best-reply function of firm i, dqi /dq - i. In which interval is this slope? A sufficient condition for uniqueness of a Cournot equilibrium is (see, e.g., Tirole (1999), page 226)
3. Suppose that demand is concave and that marginal costs are constant. For which number of n is the condition above satisfied?
4. Suppose that
Is there a unique equilibrium for any n?
Step by Step Answer:
Industrial Organization Markets and Strategies
ISBN: 978-1107069978
2nd edition
Authors: Paul Belleflamme, Martin Peitz