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Market Size, Technology Choice, and the Existence of Free-Entry Cournot Equilibrium

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  • Georg Götz

Abstract

This article adds technology choice to a free-entry Cournot model with linear demand and constant marginal costs. Firms can choose from a discrete set of technologies. This simple framework yields the nonexistence of (pure-strategy) equilibrium and the existence of multiple equilibria and equilibria in which ex ante identical firms choose different technologies, as possible outcomes. The (non)existence problem disappears if the vertical market size is large. Nonexistence is largely a small-number phenomenon. Asymmetric equilibria emerge either because of indivisibilities or because of similarity of different technologies in the average costs realized.

Suggested Citation

  • Georg Götz, 2005. "Market Size, Technology Choice, and the Existence of Free-Entry Cournot Equilibrium," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(3), pages 503-521, September.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200509)161:3_503:mstcat_2.0.tx_2-o
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    References listed on IDEAS

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    1. Luís M B Cabral & José Mata, 2003. "On the Evolution of the Firm Size Distribution: Facts and Theory," American Economic Review, American Economic Association, vol. 93(4), pages 1075-1090, September.
    2. Lambson, Val Eugene, 1987. "Is the Concentration-Profit Correlation Partly an Artifact of Lumpy Technology?," American Economic Review, American Economic Association, vol. 77(4), pages 731-733, September.
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    Cited by:

    1. Filomena, Tiago Pascoal & Campos-Náñez, Enrique & Duffey, Michael Robert, 2014. "Technology selection and capacity investment under uncertainty," European Journal of Operational Research, Elsevier, vol. 232(1), pages 125-136.
    2. Rodolphe Dos Santos Ferreira & Frédéric Dufourt, 2007. "Free entry equilibria with positive profits: A unified approach to quantity and price competition games," International Journal of Economic Theory, The International Society for Economic Theory, vol. 3(2), pages 75-94, June.
    3. Krishnendu Ghosh Dastidar & Sugata Marjit, 2022. "Market size, entry costs and free entry Cournot equilibrium," Journal of Economics, Springer, vol. 136(2), pages 97-114, July.
    4. repec:dau:papers:123456789/5841 is not listed on IDEAS

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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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