On the stability of Cournot equilibrium when the number of competitors increases

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Puu, Tonu

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Abstract	This article reconsiders whether the Cournot equilibrium really becomes a perfect competition equilibrium when the number of competitors goes to infinity. It has been questioned whether the equilibrium remains stable with an increasing number of firms. Contraindications were given for linear and for isoelastic demand functions. However, marginal costs were then taken as constant, which means adding more potentially infinite-sized firms. As we want to compare cases with few large firms to cases with many small firms, the model is tuned so as to incorporate capacity limits, decreasing with an increasing number of firms. Then destabilization is avoided.
Klassifikation	Volkswirtschaftslehre
Freie Schlagwörter	Cournot oligopoly; Capacity limits; Stability
Sprache Dokument	Englisch
Publikationsjahr	2008
Seitenangabe	S. 445-456
Zeitschriftentitel	Journal of Economic Behavior & Organization, 66 (2008) 3-4
DOI	http://dx.doi.org/10.1016/j.jebo.2006.06.010
Status	Postprint; begutachtet (peer reviewed)
Lizenz	PEER Licence Agreement (applicable only to documents from PEER project)