Rationalizability and Efficiency in an Asymmetric Cournot Oligopoly
Journal article: This paper studies rationalizability in a linear asymmetric Cournot oligopoly with a unique Nash equilibrium. It shows that mergers favors 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.
Author(s)
Gabriel Desgranges, Stéphane Gauthier
Journal
- International Journal of Industrial Organization
Date of publication
- 2015
Keywords JEL
Keywords
- Competition policy
- Cournot oligopoly
- Dominance solvability
- Efficiency
- Rationalizability
- Stability
- Airline industry
Pages
- in press, accepted manuscript
URL of the HAL notice
Version
- 1