- MATHEMATICAL SOCIAL SCIENCES Journal
- July 2020
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- We provide necessary and sufficient conditions for the existence of Cournot equilibrium for a classof demand functions when firms are identical and produce under constant returns to scale. We focuson inelastic and convex demand yielding non-concave profit functions. We show that equilibrium isunique, stable and yields well-behaved comparative statics. The model can yield huge welfare losses,non-downwards loping Laffer curves and tax reforms that are never Pareto improving. In the Appendix we generalize our results on existence and uniqueness to more general inverse demand functions andnon-identical firms.
- cournot equilibrium; welfare losses; laffer curve; tax reform