Rationalizability and efficiency in an asymmetric Cournot oligopoly |
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Affiliation: | 1. University of Cergy-Pontoise, France;2. Paris School of Economics and University of Paris 1, France |
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Abstract: | This paper studies rationalizability in a linear asymmetric Cournot oligopoly with a unique Nash equilibrium. It shows that mergers favor uniqueness of the rationalizable outcome. When one requires uniqueness of the rationalizable outcome maximization of consumers' surplus may involve a symmetric oligopoly with few firms. We interpret uniqueness of the rationalizable outcome as favoring a dampening of strategic ‘coordination’ uncertainty. An illustration to the merger between Delta Air Lines and Northwest shows that a reallocation of 1% of market share from a small carrier to a larger one has implied a lower production volatility over time, yielding a 1.5% decrease in the coefficient of variation of number of passengers. |
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