Rationalizability and efficiency in an asymmetric Cournot oligopoly

Gabriel Desgranges and Stephane Gauthier

International Journal of Industrial Organization, 2016, vol. 44, issue C, 163-176

Abstract: This paper studies rationalizability in a linear asymmetric Cournot oligopoly with a unique Nash equilibrium. It shows that mergers favor uniqueness of the rationalizable outcome. When one requires uniqueness of the rationalizable outcome maximization of consumers' surplus may involve a symmetric oligopoly with few firms. We interpret uniqueness of the rationalizable outcome as favoring a dampening of strategic ‘coordination’ uncertainty. An illustration to the merger between Delta Air Lines and Northwest shows that a reallocation of 1% of market share from a small carrier to a larger one has implied a lower production volatility over time, yielding a 1.5% decrease in the coefficient of variation of number of passengers.

Keywords: Competition policy; Cournot oligopoly; Efficiency; Rationalizability; Market volatility; Airline industry (search for similar items in EconPapers)
JEL-codes: D43 D84 L40 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Rationalizability and Efficiency in an Asymmetric Cournot Oligopoly (2016)
Working Paper: Rationalizability and Efficiency in an Asymmetric Cournot Oligopoly (2015)
Working Paper: Rationalizability and Efficiency in an Asymmetric Cournot Oligopoly (2015)
Working Paper: Rationalizability and Efficiency in an Asymmetric Cournot Oligopoly (2015)
Working Paper: Rationalizability and Efficiency in an Asymmetric Cournot Oligopoly (2015)
Working Paper: Rationalizability and Efficiency in an Asymmetric Cournot Oligopoly (2015)
Working Paper: Rationalizability and Efficiency in an Asymmetric Cournot Oligopoly (2015)
Working Paper: Rationalizability and Efficiency in an Asymmetric Cournot Oligopoly (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:44:y:2016:i:c:p:163-176

DOI: 10.1016/j.ijindorg.2015.10.011

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