The empirical content of Cournot competition

Laurens Cherchye, Thomas Demuynck and Bram De Rock

ULB Institutional Repository from ULB -- Universite Libre de Bruxelles

Abstract: We consider the testable implications of the Cournot model of market competition. Our approach is nonparametric in the sense that we abstain from imposing any functional specification on market demand and firm cost functions. We derive necessary and sufficient conditions for (reduced form) equilibrium market price and quantity functions to be consistent with the Cournot model. In addition, we present identification results for the corresponding inverse market demand function and the firm cost functions. Finally, we use our approach to derive testable restrictions for the models of perfect competition, collusion and conjectural variations. This identifies the conditions under which these different models are empirically distinguishable from the Cournot model. We also investigate empirical issues (measurement error and omitted variables) related to bringing our testable restrictions to data. © 2013 Elsevier Inc.

Keywords: Collusion; Conjectural variations; Cournot competition; Identification; Perfect competition; Testable implications (search for similar items in EconPapers)
Date: 2013
Note: SCOPUS: ar.j
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Citations: View citations in EconPapers (5)

Published in: Journal of economic theory (2013) n° 148,p.195-235

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Related works:
Journal Article: The empirical content of Cournot competition (2013)
Working Paper: The empirical content of Cournot competition (2011)
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