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Market Size, Technology Choice, and the Existence of Free-Entry Cournot Equilibrium

Georg Götz
Journal of Institutional and Theoretical Economics (JITE) / Zeitschrift für die gesamte Staatswissenschaft
Vol. 161, No. 3 (September 2005), pp. 503-521
Stable URL: http://www.jstor.org/stable/40752535
Page Count: 19
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Market Size, Technology Choice, and the Existence of Free-Entry Cournot Equilibrium
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Abstract

This article adds technology choice to a free-entry Cournot model with linear demand and constant marginal costs. Firms can choose from a discrete set of technologies. This simple framework yields the nonexistence of (pure-strategy) equilibrium and the existence of multiple equilibria and equilibria in which ex ante identical firms choose different technologies, as possible outcomes. The (non) existence problem disappears if the vertical market size is large. Nonexistence is largely a small-number phenomenon. Asymmetric equilibria emerge either because of indivisibilities or because of similarity of different technologies in the average costs realized.

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