Cournot equilibrium revisited Articles uri icon

publication date

  • July 2020

start page

  • 1

end page

  • 10

volume

  • 106

International Standard Serial Number (ISSN)

  • 0165-4896

Electronic International Standard Serial Number (EISSN)

  • 1879-3118

abstract

  • 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.

keywords

  • cournot equilibrium; welfare losses; laffer curve; tax reform