On the Equilibrium Uniqueness in Cournot Competition with Demand Uncertainty

We revisit the linear Cournot model with uncertain demand that is studied in Lagerl\"of (2006)* 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 (DM...

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Bibliographic Details
Published in:arXiv.org 2021-07
Main Authors: Leonardos, Stefanos, Melolidakis, Costis
Format: Article
Language:English
Subjects:
Concavity
Economic analysis
Economic models
Equilibrium
Failure rates
Uncertainty
Uniqueness
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Summary:We revisit the linear Cournot model with uncertain demand that is studied in Lagerl\"of (2006)* 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 Lagerl\"of (2006)* that such conditions may not be necessary. *Johan Lagerl\"of, Equilibrium uniqueness in a Cournot model with demand uncertainty. The B.E. Journal in Theoretical Economics, Vol. 6: Iss 1. (Topics), Article 19:1--6, 2006.
ISSN:2331-8422
DOI:10.48550/arxiv.1906.03558