Price increase and stability with new entries in Cournot markets

Villanova, Ramon; Paradís, Jaume; Viader Canals, Pelegrí; Miralles, Joan

Price increase and stability with new entries in Cournot markets

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Citation

Keio Economic Studies, 48, 69-96, 2012

Abstract

It is widely accepted in the literature about the classical Cournot oligopoly model that the loss of quasi competitiveness is linked, in the long run as new firms enter the market, to instability of the equilibrium. In this paper, though, we present a model in which a stable unique symmetric equilibrium is reached for any number of oligopolists as industry price increases with each new entry. Consequently, the suspicion that non quasi competitiveness implies, in the long run, instability is proved false.