Noncooperative Oligopoly in Markets with a Continuum of Traders: A Limit Theorem µa la Cournot

Francesca Busetto, Giulio Codognato and Sayantan Ghosal

No 2014-019, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)

Abstract: In this paper, we consider an exchange economy µa la Shitovitz (1973), with atoms and an atomless set. We associate with it a strategic market game of the kind first proposed by Lloyd S. Shapley and known as the Shapley window model. We analyze the relationship between the set of the Cournot-Nash equilibrium allocations of the strategic market game and the Walras equilibrium allocations of the exchange economy with which it is associated. We show, with an example, that even when atoms are countably infinite, any Cournot-Nash equilibrium allocation of the game is not a Walras equilibrium of the underlying exchange economy. Accordingly, in the original spirit of Cournot (1838), we partially replicate the mixed exchange economy by increasing the number of atoms, without affecting the atomless part, and ensuring that the measure space of agents remains finite. We show that any sequence of Cournot-Nash equilibrium allocations of the strategic market games associated with the partially replicated exchange economies approximates a Walras equilibrium allocation of the original exchange economy.

Date: 2014
New Economics Papers: this item is included in nep-com, nep-ger and nep-mic
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