Paper #646

Title:

Price increase and stability with new entries in Cournot markets

Authors:

Ramon Villanova, Jaume Paradís, Pelegrí Viader and Joan Miralles

Date:

October 2002 (Revised: January 2012)

Abstract:

It is widely accepted in the literature about the classical Cournot oligopoly model that the loss of quasi–competitiveness is linked, in the long run as new firms enter the market, to instability of the equilibrium. In this paper, though, we present a model in which a stable unique symmetric equilibrium is reached for any number of oligopolists as industry price increases with each new entry. Consequently, the suspicion that non–quasi–competitiveness implies, in the long run, instability is proved false.

Keywords:

Cournot equilibrium, non-cooperative oligopoly, quasi-competitiveness, stability

JEL codes:

D43,C62

Area of Research:

Statistics, Econometrics and Quantitative Methods

Published in:

Keio Economic Studies, 48, 69-96, 2012

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