Behavioral Heterogeneity and Cournot Oligopoly Equilibrium
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.
Grandmont, Jean-Michel, "Behavioral Heterogeneity and Cournot Oligopoly Equilibrium" (1993). Cowles Foundation Discussion Papers. 1287.