Poisson-Cournot Games

43 Pages Posted: 15 May 2020

See all articles by Francesco De Sinopoli

Francesco De Sinopoli

University of Verona - Department of Economics

Christopher Kunstler

Forschungszentrum Jülich GmbH - Institut für Energie und Klimaforschung (IEK-5)

Claudia Meroni

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM)

Carlos Pimienta

University of New South Wales (UNSW)

Date Written: May 13, 2020

Abstract

We construct a Cournot model in which firms have uncertainty about the total number of firms in the industry. We model such an uncertainty as a Poisson game and we characterize the set of equilibria after deriving some novel properties of the Poisson distribution. When the marginal cost is zero, the number of equilibria increases with the expected number of firms (n) and for n ≥ 3 every equilibrium exhibits overproduction relative to the model with deterministic population size. Overproduction is robust to sufficiently small marginal costs, however, for a fixed marginal cost, the set of equilibria approaches the equilibrium quantity of the deterministic model as n goes to infinity.

Keywords: Cournot competition, Population uncertainty, Poisson games, Poisson distribution

JEL Classification: C72, D43, L13

Suggested Citation

De Sinopoli, Francesco and Kunstler, Christopher and Meroni, Claudia and Pimienta, Carlos, Poisson-Cournot Games (May 13, 2020). UNSW Economics Working Paper 2020-07, Available at SSRN: https://ssrn.com/abstract=3600045 or http://dx.doi.org/10.2139/ssrn.3600045

Francesco De Sinopoli

University of Verona - Department of Economics

Via dell'Artigliere, 8
37129 Verona
Italy

Christopher Kunstler

Forschungszentrum Jülich GmbH - Institut für Energie und Klimaforschung (IEK-5) ( email )

Jülich, 52425
Germany

Claudia Meroni

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM) ( email )

Via Conservatorio, 7
Milan, 20122
Italy

Carlos Pimienta (Contact Author)

University of New South Wales (UNSW) ( email )

Kensington
High St
Sydney, NSW 2052
Australia

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