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A Nonparametric Analysis of the Cournot Model

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  • Carvajal, Andres

    (CRETA and Department of Economics, University of Warwick)

  • Quah, John K.-H.

    (Department of Economics, Oxford University,)

Abstract

An observer makes a number of observations of an industry producing a homogeneous good. Each observation consists of the market price, the output of individual rms and perhaps information on each rm's production cost. We provide various tests (typically, linear programs) with which the observer can determine if the data set is consistent with the hypothesis that rms in this industry are playing a Cournot game at each observation. When cost information is wholly or partially unavailable, these tests could potentially be used to derive cost information on the rms. This paper is a contribution to the literature that aims to characterize (in various contexts) the restrictions that a data set must satisfy for it to be consistent with Nash outcomes in a game. It is also inspired by the seminal result of Afriat (and the subsequent literature) which addresses similar issues in the context of consumer demand, though one important technical di erence from most of these results is that the objective functions of rms in a Cournot game are not necessarily quasiconcave. Keywords:

Suggested Citation

  • Carvajal, Andres & Quah, John K.-H., 2009. "A Nonparametric Analysis of the Cournot Model," The Warwick Economics Research Paper Series (TWERPS) 922, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:922
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    References listed on IDEAS

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    1. Andrés Carvajal, 2003. "Testable Restrictions of Nash Equilibrium in Games with Continuous Domains," Borradores de Economia 3555, Banco de la Republica.
    2. Forges, Françoise & Minelli, Enrico, 2009. "Afriat's theorem for general budget sets," Journal of Economic Theory, Elsevier, vol. 144(1), pages 135-145, January.
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    10. Carvajal, Andres & Ray, Indrajit & Snyder, Susan, 2004. "Equilibrium behavior in markets and games: testable restrictions and identification," Journal of Mathematical Economics, Elsevier, vol. 40(1-2), pages 1-40, February.
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    Cited by:

    1. Cherchye, Laurens & Demuynck, Thomas & De Rock, Bram, 2011. "Testable implications of general equilibrium models: An integer programming approach," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 564-575.

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    More about this item

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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