A Nonparametric Test of Strategic Behavior in the Cournot Model

MPRA Paper from University Library of Munich, Germany

Abstract: We devise a nonparametric test of strategic behavior in a multiproduct Cournot oligopoly. It is assumed that firms have cost functions that do not change over the period of observation but that market demand can change in each period. Market prices and firm-specific production quantities are observed and it is assumed that neither the inverse demand functions nor the cost functions are known. The driving assumptions of the test are that market inverse demand functions are decreasing and differentiable at each period and that cost functions are increasing and convex for each firm. Under these very general conditions, we show that this test imposes strong restrictions on observed data. We apply the test to the crude oil market and find that strategic behavior is strongly rejected.

Keywords: Competitive behavior; Multiproduct Cournot oligopoly; Nonparametric test; Crude oil market; OPEC. (search for similar items in EconPapers)
JEL-codes: C14 C72 D21 D43 (search for similar items in EconPapers)
Date: 2009-08-01
New Economics Papers: this item is included in nep-com, nep-cse, nep-ene and nep-ind
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:16560

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