SFB 303 Discussion Paper No. A-402
Author: Grandmont, Jean-Michel
Title: Behavioral Heterogeneity and Cournot Oligopoly Equilibrium
Abstract: It is not unfrequent to see studies of imperfect competition or of
industrial organization rest upon questionable foundations such as the
hypothesis that inverse market demand is, whenever it is positive, concave
or even linear. Assumptions of this sort are not robust (i.e. "additive") in
the sense that they are not usually preseved through aggregation of
different sectors that would satisfy them individually. The present paper
investigates an alternative specification that is based upon the plausible
existence of significant heterogeneities among demanders. It is demonstrated
that specific forms of demand heterogeneity tend to stabilize market
expenditures. In a partial equilibrium context, sufficient demand
heterogeneity is shown to imply existence and unicity of a Cournot
oligopoly equilibrium.
Keywords: Aggregation, heterogeneity, equivalence scales, oligopoly equilibrium.
JEL-Classification-Number: D00, D43, L13
Creation-Date: February 1993
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