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Optimal Research for Cournot Oligopolists

Li, Lode and McKelvey, Richard D. and Page, Talbot (1985) Optimal Research for Cournot Oligopolists. Social Science Working Paper, 563. California Institute of Technology , Pasadena, CA. (Unpublished) https://resolver.caltech.edu/CaltechAUTHORS:20170915-164128100

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Abstract

We extend the classical Cournot model to take account of uncertainty in either the cost function or the demand function. By undertaking research, firms can acquire private (asymmetric) information to help resolve their uncertainty and make a more informed production decision. The model is a two stage game: in the first stage research levels are chosen, and in the second stage, conditional on private research outcomes, production decisions are made. We find that for a linear, continuous information structure there is a unique Nash equilibrium to the game. In the equilibrium there may be an inefficient amount of aggregate research and there may be incomplete pooling as well. The model specializes to the classical case when the cost of research is zero (and each firm gains essentially the same information by doing an infinite amount of research) or when the cost of research is so high no firm undertakes research.


Item Type:Report or Paper (Working Paper)
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http://resolver.caltech.edu/CaltechAUTHORS:20171113-154623808Related ItemPublished Version
Additional Information:Published as Li, Lode, Richard D. McKelvey, and Talbot Page. "Optimal research for Cournot oligopolists." Journal of Economic Theory 42.1 (1987): 140-166.
Group:Social Science Working Papers
Series Name:Social Science Working Paper
Issue or Number:563
Record Number:CaltechAUTHORS:20170915-164128100
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20170915-164128100
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:81507
Collection:CaltechAUTHORS
Deposited By: Jacquelyn Bussone
Deposited On:19 Sep 2017 17:43
Last Modified:03 Oct 2019 18:43

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