A Dynamic Model of Cournot Competition for an Oligopolistic Market

Zeng Lian and Jie Zheng
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Zeng Lian: International Business School, Beijing Foreign Studies University, Beijing 100089, China
Jie Zheng: Department of Economics, School of Economics and Management, Tsinghua University, Beijing 100084, China

Mathematics, 2021, vol. 9, issue 5, 1-18

Abstract: This paper studies firms’ dynamic interaction in a Cournot market. In each period of the game, the firm decides whether to make a stochastic positioning investment (establishing or maintaining its position in market competition). The market demand is also stochastic (high or low). By adopting symmetric Market perfect Nash equilibrium, firms choose strategies to maximize the discounted present value of cash flow. By considering the cases with one, two, and three active firms in the market, respectively, we present the stage game market outcome, show the transition probabilities, find the steady state of the system, and discuss the speed of convergence. Our work allows for two types of uncertainty in firms’ interactions, which contribute to the dynamic oligopoly literature.

Keywords: dynamic market; positional investment; uncertain demand (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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