Rationalizability and Efficiency in an Asymmetric Cournot Oligopoly

Gabriel Desgranges and Stephane Gauthier

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: We study rationalizable solutions in a linear asymmetric Cournot oligopoly. We show that symmetry across firms favors multiplicity of rationalizable solutions: A merger (implying a greater asymmetry across firms) makes out-of-equilibrium behavior less likely and should dampen &lquo;coordination&rquo; volatility. The market structure maximizing consumers' surplus at a rationalizable solution is not always the competitive one: This may be a symmetric oligopoly with few firms. An empirical illustration to the airlines industry shows that a reallocation of 1% of market share from a small carrier to a larger one yields a 1.3% decrease in volatility, measured by the within carrier standard error of the number of passengers

Keywords: Competition policy; Cournot oligopoly; dominance solvability; efficiency; rationalizability; stability; airline industry (search for similar items in EconPapers)
JEL-codes: D43 D84 L40 (search for similar items in EconPapers)
Date: 2014-03
New Economics Papers: this item is included in nep-com, nep-ger and nep-ind
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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 (2015)
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