COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 1044 "Behavioral Heterogeneity and Cournot Oligopoly Equilibrium" Jean-Michel Grandmont February 1993 It is not infrequent to see studies of imperfect competition or of industrial
organization rest upon questionable foundations such as the hypothesis that inverse market
demand is, whenever it is positive, concave or even linear. Assumptions of this sort are
not robust (i.e., "additive") in the sense that they are not usually preserved
through aggregation of different sectors that would satisfy them individually. The present
paper investigates an alternative specification that is based upon the plausible existence
of significant heterogeneities among demanders. It is demonstrated that specific forms of
demand heterogeneity tend to stabilize market expenditures. In a partial equilibrium
context, sufficient demand heterogeneity is shown to imply existence and unicity of a
Cournot oligopoly equilibrium. |
