Rationalizability and Efficiency in an Asymmetric Cournot Oligopoly

Gabriel Desgranges (1) , Stéphane Gauthier (2, 3)

1 THEMA - Théorie économique, modélisation et applications
2 CES - Centre d'économie de la Sorbonne
3 PSE - Paris School of Economics

This paper studies rationalizability in a linear asymmetric Cournot oligopoly with a unique Nash equilibrium. It shows that mergers favors uniqueness of the rationalizable outcome. When requires uniqueness of the rationalizable outcome maximization of consumers' surplus may involve a symmetric oligopoly with few firms. We interpret uniqueness of the rationalizable outcome as favoring a dampening of strategic ‘coordination’ uncertainty. An illustration to the merger between Delta Air Lines and Northwest shows that a reallocation of 1% of market share from a small carrier to a larger one has implied a lower production volatility over time, yielding a 1.5% decrease in the coefficient of variation of number of passengers.

Mots clés: rationalizability; stability; airline industry; competition policy; Cournot oligopoly; dominance solvability; efficiency

Domaines: Economies et finances

Gabriel Desgranges, Stéphane Gauthier. Rationalizability and Efficiency in an Asymmetric Cournot Oligopoly. 2015. ⟨halshs-00975002v3⟩