Non-Monotonicity of Equilibrium Price

50 Pages Posted: 5 Jun 2017 Last revised: 14 Jul 2020

See all articles by Rajeev R. Bhattacharya

Rajeev R. Bhattacharya

Washington Finance and Economics; Johns Hopkins University

Date Written: July 13, 2020


This paper examines the implications for equilibrium price of a shift in demand and also provides formal characterizations in a general dynamic model of perfect equilibrium, the relation between dominated and dominant strategies, the relation between reversion and generalized reversion strategy profiles, and also of efficiency and temporal deviation-freeness. First, I consider two static Cournot oligopoly models with linear demand, linear costs, and a finite number of firms, and I prove strong non-monotonocity of any equilibrium price. In a stochastically indefinite horizon simultaneous moves Cournot oligopoly model with a countable number of firms, with the discount factors and the demand parameters following general stochastic processes, I prove that for a path which follows a stationary function of the demand parameter and which is sustainable in a strategy profile that is efficient among the set of perfect equilibrium strategy profiles, any equilibrium price is strongly non-monotonic.

Keywords: Industrial Organization, Price, Demand, Non-Monotonicity, Cournot, Static, Dynamic, Game Theory, Perfect Equilibrium, Stochastic Processes

JEL Classification: L13, D43, C72, C73

Suggested Citation

Bhattacharya, Rajeev, Non-Monotonicity of Equilibrium Price (July 13, 2020). Available at SSRN: or

Rajeev Bhattacharya (Contact Author)

Washington Finance and Economics ( email )

United States


Johns Hopkins University

1717 Massachusetts Avenue, NW
Washington, DC 20036
United States

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