Survival in Cournot games

Patrick Leoni ()

Journal of Mathematical Economics, 2013, vol. 49, issue 5, 429-434

Abstract: In a model that encompasses a general equilibrium framework, we consider a monopolist (a producer) with subjective beliefs that endogenously hedges against fluctuations in input prices in a complete market. We allow for entries and Cournot competition in this economy, and we study how erroneous beliefs affect long-run survival for those firms. We introduce a notion of entropy of beliefs, and we use it to characterize the class of beliefs for which the monopolist eventually disappears almost surely. When disappearance occurs, the whole market power switches to the entrant making the most accurate predictions in our sense. The class of beliefs for which survival occurs is much broader than that of perfectly competitive settings.

Keywords: Market selection hypothesis; Survival; Entrants; Cournot competition; Heterogeneous beliefs (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:49:y:2013:i:5:p:429-434

DOI: 10.1016/j.jmateco.2013.05.003

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