Ordinal Versus Cardinal Complementarity: The Case of Cournot Oligopoly

Abstract

While ordinal complementarity is more general than cardinal complementarity, the corresponding global sufficient conditions placed on the primitives of a constrained optimization problem are generally not comparable. We explore this issue in detail for the special case of a Cournot firm. We derive necessary and sufficient conditions for downward-sloping best-responses by imposing the ordinal test only for output levels that are actually reached. Both global tests, cardinal and ordinal, are shown not to be critical sufficient conditions. Finally, we confirm that checking supermodularity of suitably transformed profits can work when the global tests for ordinal and cardinal complementarity both fail.

Keywords: Cournot oligopoly, complementarity, supermodularity, single-crossing property

JEL Classification: C72, D43, L13