Rationalizability and Efficiency in an Asymmetric Cournot Oligopoly

Gabriel Desgranges and Stephane Gauthier

PSE-Ecole d'économie de Paris (Postprint) from HAL

Abstract: This paper studies rationalizability in a linear asymmetric Cournot oligopoly with a unique Nash equilibrium. It shows that mergers favors 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; dominance solvability; efficiency; rationalizability; stability; airline industry (search for similar items in EconPapers)
Date: 2015-11
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Published in International Journal of Industrial Organization, 2015, in press, accepted manuscript. ⟨10.1016/j.ijindorg.2015.10.011⟩

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Related works:
Journal Article: Rationalizability and efficiency in an asymmetric Cournot oligopoly (2016)
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 (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:hal-01242006

DOI: 10.1016/j.ijindorg.2015.10.011

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