Tuesday, February 2, 2016
Rationalizability and Efficiency in an Asymmetric Cournot Oligopoly
Gabriel Desgranges (THEMA – Universite de Cergy) and Stephane Gauthier (Centre d’Economie de la Sorbonne – Paris School of Economics) discuss Rationalizability and Efficiency in an Asymmetric Cournot Oligopoly.
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 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
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