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Licensed Unlicensed Requires Authentication Published by De Gruyter February 19, 2020

On the Equilibrium Uniqueness in Cournot Competition with Demand Uncertainty

Stefanos Leonardos ORCID logo and Costis Melolidakis

Abstract

We revisit the linear Cournot model with uncertain demand that is studied in Lagerlöf (2006. “Equilibrium Uniqueness in a Cournot Model with Demand Uncertainty.” The B.E. Journal of Theoretical Economics 6, no. 1. (Topics), Article 19: 1–6.) and provide sufficient conditions for equilibrium uniqueness that complement the existing results. We show that if the distribution of the demand intercept has the decreasing mean residual demand (DMRD) or the increasing generalized failure rate (IGFR) property, then uniqueness of equilibrium is guaranteed. The DMRD condition implies log-concavity of the expected profits per unit of output without additional assumptions on the existence or the shape of the density of the demand intercept and, hence, answers in the affirmative the conjecture of Lagerlöf (2006. “Equilibrium Uniqueness in a Cournot Model with Demand Uncertainty.” The B.E. Journal of Theoretical Economics 6, no. 1. (Topics), Article 19: 1–6.) that such conditions may not be necessary.

JEL Classification: C7

Acknowledgements

The authors thank an anonymous reviewer for the quality of their reports and their invaluable feedback, comments and corrections which considerably improved the final version of the paper. Stefanos Leonardos gratefully acknowledges support by a scholarship of the Alexander S. Onassis Public Benefit Foundation.

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Published Online: 2020-02-19

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