Insisting on a non-negative price: oligopoly, uncertainty, welfare, and multiple equilibria

Arbeitspapier

I study Cournot competition under incomplete information about demand while assuming that market price must be non-negative for all demand realizations. Although this assumption is very natural, it has only rarely been made in the earlier literature. Yet it has important economic consequences: (1) multiple (symmetric, pure strategy) equilibria can exist, despite the fact that demand and cost are linear; and (2) expected total surplus can be larger when the firms do not know demand than when they do, a result which has important implications for the social desirability of information sharing. The arguments of the paper are relevant also for price competition and for uncertainty about, e.g., cost or the number of firms, and these issues are discussed.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: WZB Discussion Paper ; No. SP II 2003-04

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: Monopoly ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Information, Knowledge, and Uncertainty: General ; Monopoly; Monopolization Strategies ; Oligopoly and Other Imperfect Markets ; Antitrust Issues and Policies: General
• Subject: Non-negativity constraint ; Multiple equilibria ; Value of information ; Information sharing ; Trade associations ; Antitrust policy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lagerlöf, Johan
• Event: Veröffentlichung
• (who): Wissenschaftszentrum Berlin für Sozialforschung (WZB)
• (where): Berlin
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/51034
• Last update: 10.03.2025, 11:42 AM CET