Abstract
We look at a Cournot model in which each firm may be unreliable with random capacity, so the total quantity brought into market is uncertain. The Cournot model has a unique pure strategy Nash equilibrium (NE), in which the number of active firms is determined by each firm's production cost and reliability. Our results indicate the following effects of unreliability: the number of active firms in the NE is more than that each firm is completely reliable and the expected total quantity brought into market is less than that each firm is completely reliable. Whether a given firm joins in the game is independent of its reliability, but any given firm always hopes that the less-expensive firms' capacities are random and stochastically smaller.
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