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Rationalizability and Efficiency in an Asymmetric Cournot Oligopoly

Author

Listed:
  • Gabriel Desgranges

    (THEMA - Théorie économique, modélisation et applications - UCP - Université de Cergy Pontoise - Université Paris-Seine - CNRS - Centre National de la Recherche Scientifique)

  • Stéphane Gauthier

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

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 one 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.

Suggested Citation

  • Gabriel Desgranges & Stéphane Gauthier, 2015. "Rationalizability and Efficiency in an Asymmetric Cournot Oligopoly," PSE-Ecole d'économie de Paris (Postprint) hal-01242006, HAL.
    • Handle: RePEc:hal:pseptp:hal-01242006
    DOI: 10.1016/j.ijindorg.2015.10.011
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    References listed on IDEAS

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    Cited by:

    1. Philippe Gagnepain & Stéphane Gauthier, 2021. "Strategic uncertainty and market size: An illustration on the Wright amendment," Working Papers halshs-03359597, HAL.
    2. Richard Cornes & Luciana C. Fiorini & Wilfredo L. Maldonado, 2021. "Expectational stability in aggregative games," Journal of Evolutionary Economics, Springer, vol. 31(1), pages 235-249, January.
    3. Alexandra Belova & Philippe Gagnepain & Stéphane Gauthier, 2020. "An assessment of Nash equilibria in the airline industry," Working Papers halshs-02932780, HAL.

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    More about this item

    Keywords

    competition policy; Cournot oligopoly; dominance solvability; efficiency; rationalizability; stability; airline industry;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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