The stability of the cournot oligopoly model: A reassessment

The stability properties of the Cournot oligopoly model are examined for the continuous adjustment process. Sufficient conditions for instability are established which are shown to be of significance when the number of firms, n, is small. Local and global stability are shown under appropriate conditions which for global stability include the restriction n ? 5. The proof of global stability corrects a well-known proof by F. Hahn (Rev. Econ. Stud.29 (1962), 329–331). Results for the discrete time adjustment process are reported and the restrictiveness of the model's assumptions are discussed.     

Profit-sharing in a unionized cournot duopoly

The main purpose of this paper is to analyze when it is optimal for firms in a unionized duopoly to introduce profit-sharing. It is shown that a firm only prefers a profit-sharing system if its own union does not have “too much” bargaining power, and if the union in the other firm does not have “too much” bargaining power. However, if a firm introduces profit-sharing, the employment increases, and the price in the goods market decreases. Hence, even if it is not in the own interest of a firm to introduce profit-sharing, it may be in the interest of the society.     

Free entry into telecommunications?

The two leading principles of pricing for public enterprises are outlined: Value based and cost based pricing. It is shown that optimal pricing à la Ramsey-Boiteux is closely related to value based pricing which itself is connected with Lindahl pricing of public goods. Cost based pricing is related to the pricing in competitive markets. Opening up of telecommunication to competition implies a change from value based (public good) pricing to cost based (pritate good) pricing. It is shown why specific developments in telecommunication technology make a switch to cost based pricing and a competitive environment appropriate. At the end a proposal is developed for a gradual change towards competition which would meet less political resistance.     

Spatial dispersion in cournot competition

This paper considers the spatial model used by Anderson and Neven (1991) to study firms' decisions on locations without restricting the consumers' reservation price. We note that the pattern of locations varies as the reservation price for a fixed transportation rate decreases. For a high enough reservation price, we find Anderson and Neven (1991)'s result where firms group at the center of the market and serve all consumers. As the reservation price falls, firms start to move away from each other, increasing the quantities shipped to the consumers close to their locations.     

Free and second-best entry in oligopolies with network effects

We compare the number of firms in equilibrium in a Cournot industry with positive network effects and complete compatibility, under free and second-best entry. Under free entry, the firms decide whether to enter the market or not; in the second-best problem, the number of firms is established by the regulator to maximize social welfare (the regulator controls entry but not production). We show that when individual equilibrium output decreases with entry (business-stealing competition), free entry may lead to more or less firms than the second-best problem. This contrasts with the standard (nonnetwork) Cournot oligopoly model, wherein with business-stealing competition, free entry leads to an excessive number of firms compared with the second-best solution.     

The cournot duopoly model reconsidered in the presence of costly communication and enforcement agreements

Recently I proposed a general notion of equilibrium for n-person games which is based on mutual threats and promises (responses), and which leads, in general, to a determinate solution with respect to the order of choice moves. The nature of the solution set in our model is a function of the action sets, the payoff functions, and the cost of ‘communication and enforcement of agreements’ (C&E). The main concern of this paper is to show that the Cournot duopoly solution, for the case of a linear demand function facing two identical firms, can be regenerated by our solution concept under a certain assumption about a high cost C&E. On the other hand, it is shown that under a relatively low cost of C&E the Cournot/Nash solution does not belong to our solution set, because it is Pareto inferior for both duopolists relative to some solutions in our set, among them, the standard monopoly solution.     

Structural stability in a cross-country neoclassical growth model

This paper tests for structural stability of the Solow growth model, as recently extended to human capital and applied to a large section of countries by Mankiw, Romer and Weil. The evidence is obtained by ranking each explanatory variable of the model in ascending order and then running recursive regressions and by then splitting the original sample according to cluster analysis before running separate regressions. The evidence shows that the model exhibits overall structural breaks; the convergence coefficient, however, is very stable; the coefficients of the production factors become unstable where the factors become very abundant or very scarce; the coefficient of labour growth is negative and significant, as required by the theory, only if a small group of countries with scarce labour is considered; the same coefficient is instead positive and significant for a group of countries with abundant labour and favourable initial income and investments; the coefficient of investment in human capital is not significant if abundant labour countries or, simply, if influential countries in the regression are not considered.     

Free banking and the stability of early joint-stock banking

Proponents of free banking argue that systems adopting theirpolicies will be stable. In this paper, we present evidencesuggesting that, in general, early joint-stock banking systemsdid not adopt free banking, and those that did proved to beunstable. In particular, we demonstrate that those systems imposingregulations were generally stable. We rationalise the successof regulation as a pragmatic solution to the time-inconsistencyproblem arising from the peculiar nature of the banking firm.Notably, we find that the ‘golden age’ of free bankingstability can be attributed to restrictions on the organisationalform of the early banking firm.     

Dynamic stability in a model of dual exchange rates

The dynamic stability of a small open economy operating under a regime of dual exchange rates is shown to depend on residents' net foreign asset position. This result is in contrast to the economy's dynamic behavior under unified fixed-rate and flexible-rate regimes where stability is unrelated to net foreign asset position.     

A test of stability in a linear altruism model

Linear altruism predicts the estimated preferences to be independent of the subject’s position in the game, if the role allocation is randomly determined, because subjects, in each role, have the same preferences ex ante. We test and reject this hypothesis.     

Endogenous fluctuations in a cournotian monopolistic competition model with free entry and market power variability

The purpose of this article is to show that there is a link between imperfections of competition and occurrence of endogenous fluctuations. We consider a two-sector model in which a perfectly competitive final good sector uses inputs that are produced in a Cournot monopolistic competition market. We show that when inputs are not perfect substitutes, and the depreciation rate of capital is sufficiently small, Neimark bifurcations are susceptible to emerge. This is a consequence of additional variability in the dynamical system generated by the dependence of the markup on the number of firms. This number changes over time because firms can enter and exit the market without costs. Moreover, a fixed cost in the technology ensures that the number of active firms at a given date is finite provided that the elasticity of substitution between inputs is bounded from above.     

Research cooperation and international standards in a model of coalition stability

Suggestions on international cooperation in climate policy beyond 2012 include substituting or complementing international environmental agreements (IEA) with technology-oriented agreements (TOA). We look at the impact of TOA on environmental cooperation in a framework of coalition stability. Using a numerical model, we analyze the differences of several TOA and how they interact. We find that participation in and environmental effectiveness of the IEA are raised less effectively when the TOA focuses on research cooperation in mitigation technology rather than cooperation on augmenting productivity in the private good sector. This is due to the former having an effect on all actors via emissions, whereas effects of the latter are exclusive to research partners. For the same reason, we find that restricting research cooperation to the coalition is only credible when it focuses on productivity. Technology standards that reduce the emission intensity of production are unlikely to raise participation by themselves and may suffer from inefficiencies. However, these disadvantages do not apply when standards are implemented as a complementary instrument. Separately negotiated technology standards may hence facilitate participation in an IEA without adding to its complexity.     

The cournot oligopoly and competitive equilibria as solutions to non-linear complementarity problems

The Cournot oligopoly and competitive equilibria are identified with solutions to non-linear complementarity problems, which leads to integration of the existence and stability proofs of these equilibria.     

Structural stability and model design

The paper introduces the concept of structural stability and proposes that it should be considered a necessary property of scientifically valid models. Formalization of the concept is considered in both linear and non-linear models. A strong preference in favour of the wider use of non-linear models is supported by consideration of the dangers of linearization in dynamic models. The importance of structural stability is demonstrated with reference to dynamic rational expectations models which exhibit the saddle-point property. In such cases convergence to equilibrium is shown to be a structurally unstable property which can be forced by restrictive auxillary assumptions, which are highlighted.     

Evolutionary stability of social norms in a socioeconomic equilibrium model

A hybrid of a model of economic equilibrium in two markets and a social game is formed. The link between the two is established through a social norm that conditions correct social behavior on economic variables and therefore distorts the economic equilibrium allocation. The initial endowment of an individual determines whether she gains from a social norm. The evolution of norms is examined in a dynamic model where norms are more likely to persist if they deliver higher utility to their believers. Also it is assumed that norms lose importance when they are disobeyed by their believers. Optimally coordinating norms are not necessarily evolutionarily stable, and a suboptimal norm can be the outcome of the evolutionary process.     

Existence and stability of rational expectation-equilibria in a simple overlapping generation model

We consider a simple overlapping generation model with outside money and one consumption good. For a big class of preference relations, it is shown that globally no self-fulfilling expectation exists (except the trivial one) if the information set contains only past and present prices. Even locally, positive results can be obtained for homothetic preferences only. To get asymptotic stability this class must be restricted again: The elasticity of substitution must be very small. The implications of this are very negative: A Learning process can never reach rationality.     

Weak stability and a bargaining set for the marriage model

In this note we introduce weak stability, a relaxation of the concept of stability for the marriage model by assuming that the agents are no longer myopic in choosing a blocking pair. The new concept is based on threats within blocking pairs: an individually rational matching is weakly stable if for every blocking pair one of the members can find a more attractive partner with whom he forms another blocking pair for the original matching. Our main result is that under the assumption of strict preferences, the set of weakly stable and weakly efficient matchings coincides with the bargaining set of Zhou (1994, Games Econ. Behav. 6, 512–526) for this context.     

From innovation to market entry: a strategic management model for new technologies

In this paper, we introduce a new framework that generates a list of strategic actions to support successful management of the innovation process as new technologies are taken to market. The framework links different stakeholders inside and outside the organisation to obtain an holistic view of the requirements necessary to develop the new technology. It integrates and synthesises existing frameworks into an inclusive set of guidelines. The framework is then tested in a case study located in a mid-size semiconductor organisation currently seeking new business opportunities in the emerging photovoltaic market. We conclude by reflecting on the usefulness of the model. Theoretically, the paper contributes to the literature on the management of the introduction of new technologies; practically, the framework provides a normative tool for practising managers.