Nonparallel Demand Increases in an Asymmetric Cournot Oligopoly

Abstract

We examine equilibrium responses of a Cournot oligopoly to two typical types of nonparallel demand increases. Results based on a linear demand curve show that in terms of profits, increases in demand that result in a more elastic demand curve are beneficial to every firm, with large firms benefiting disproportionately. In sharp contrast, only certain small firms benefit from demand increases that result in a more inelastic demand. Our results have implications in marketing and government policy making.

Keywords: Cournot, demand rotation, nonparallel demand increases, profits

JEL Classification: L13, M30