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On the stability of Cournot equilibrium when the number of competitors increases
[journal article]
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... view more
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.... view less
Classification
Political Economy
Free Keywords
Cournot oligopoly; Capacity limits; Stability
Document language
English
Publication Year
2008
Page/Pages
p. 445-456
Journal
Journal of Economic Behavior & Organization, 66 (2008) 3-4
DOI
https://doi.org/10.1016/j.jebo.2006.06.010
Status
Postprint; peer reviewed
Licence
PEER Licence Agreement (applicable only to documents from PEER project)