Bayesian Nash Equilibrium in 'Linear' Cournot Models with Private Information about Costs

Sjaak Hurkens

No 674, Working Papers from Barcelona School of Economics

Abstract: Calculating explicit closed form solutions of Cournot models where firms have private information about their costs is, in general, very cumbersome. Most authors consider therefore linear demands and constant marginal costs. However, within this framework, the nonnegativity constraint on prices (and quantities) has been ignored or not properly dealt with and the correct calculation of all Bayesian Nash equilibria is more complicated than expected. Moreover, multiple symmetric and interior Bayesian equilibria may exist for an open set of parameters. The reason for this is that linear demand is not really linear, since there is a kink at zero price: the general "linear" inverse demand function is P(Q) = max{a – bQ,0} rather than P(Q) = a – bQ.

Keywords: private information; cournot; Bayesian Nash equilibrium (search for similar items in EconPapers)
JEL-codes: C72 D43 D82 (search for similar items in EconPapers)
Date: 2015-09
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Related works:
Journal Article: Bayesian Nash equilibrium in “linear” Cournot models with private information about costs (2014)
Working Paper: Bayesian Nash Equilibrium in ''Linear'' Cournot Models with Private Information About Cost (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:674

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