Non-Quasi-Competitiveness and Stability in Cournot's Model

Abstract

This paper retakes previous work of the authors, about the relationship between non{quasi{competitiveness (the increase in price caused by an increase in the number of oligopolists) and stability of the equilibrium in the classical Cournot oligopoly model. Though it has been widely accepted in the literature that the loss of quasi{competitiveness is linked, in the long run as new rms entered the market, to instability of the model, the authors in their previous work put forward a model in which a situation of monopoly changed to duopoly losing quasi{competitiveness but maintaining the stability of the equilibrium. That model could not, at the time, be extended to any number of oligopolists. The present paper exhibits such an extension. An oligopoly model is shown in which the loss of quasi{competiti- veness resists the presence in the market of as many rms as one wishes and where the successive Cournot's equilibrium points are unique and asymptotically stable. In this way, for the rst time, the conjecture that non{quasi{competitiveness and instability were equivalent in the long run, is proved false.