On the Equilibrium Uniqueness in Cournot Competition with Demand Uncertainty

Leonardos Stefanos () and Melolidakis Costis ()
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Leonardos Stefanos: Engineering Systems and Design, Singapore University of Technology and Design, 8 Somapah Rd, Singapore487372Singapore
Melolidakis Costis: Department of Mathematics, National and Kapodistrian University of Athens, University Campus 157 84, Zografou Athens, Greece

The B.E. Journal of Theoretical Economics, 2020, vol. 20, issue 2, 6

Abstract: We revisit the linear Cournot model with uncertain demand that is studied in Lagerlöf (2006. “Equilibrium Uniqueness in a Cournot Model with Demand Uncertainty.” The B.E. Journal of Theoretical Economics 6, no. 1. (Topics), Article 19: 1–6.) and provide sufficient conditions for equilibrium uniqueness that complement the existing results. We show that if the distribution of the demand intercept has the decreasing mean residual demand (DMRD) or the increasing generalized failure rate (IGFR) property, then uniqueness of equilibrium is guaranteed. The DMRD condition implies log-concavity of the expected profits per unit of output without additional assumptions on the existence or the shape of the density of the demand intercept and, hence, answers in the affirmative the conjecture of Lagerlöf (2006. “Equilibrium Uniqueness in a Cournot Model with Demand Uncertainty.” The B.E. Journal of Theoretical Economics 6, no. 1. (Topics), Article 19: 1–6.) that such conditions may not be necessary.

Keywords: Cournot model; demand uncertainty; Unique Equilibrium; Demand Distributions (search for similar items in EconPapers)
JEL-codes: C7 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1515/bejte-2019-0131

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