Cournot Competition on a Network of Markets And Firms

Abstract

Suppose markets and firms are connected in a bi-partite network, where firms can only supply to the markets they are connected to. Firms compete a la Cournot and decide how much to supply to each market they have a link with. We assume that markets have linear demand functions and firms have convex quadratic cost functions. We show there exists a unique equilibrium in any given network of firms and markets. We provide a formula which expresses the quantities at an equilibrium as a function of a network centrality measure.

Keywords: Cournot markets, networks, nash equilibrium, centrality measures

JEL Classification: C62, C72, D85, L11