Cournot Competition Under Knightian Uncertainty

Cournot Competition under Uncertainty∗

We analyze Cournot competition under demand uncertainty. We show that under rather general assumptions, the game has no asymmetric equilibria but multiple symmetric equilibria. Multiplicity is caused by the requirement of nonnegative prices and remains an issue also for simple demand specifications, such as the linear case. We then show that uniqueness of equilibrium is guaranteed if uncertaint...

Return Predictability under Knightian Uncertainty

The predictability of stock and bond excess returns is investigated from an investment perspective in the presence of Knightian uncertainty. Uncertainty about the return distribution is formalized with the maxmin expected utility approach of Gilboa and Schmeidler (1989). It is analyzed how risk and uncertainty aversion di¤er in their e¤ects on optimal portfolio choice. Most importantly, it is s...

Welfare losses under Cournot competition

In a market for a homogeneous good where firms are identical, compete in quantities and produce with constant returns, the percentage of welfare losses (PWL) is small with as few as five competitors for a class of demand functions which includes linear and isoelastic cases. We study markets with positive fixed costs and asymmetric firms. We provide exact formulae of PWL and robust constructions...

Planning under Risk and Knightian Uncertainty

Two noteworthy models of planning in AI are probabilistic planning (based on MDPs and its generalizations) and nondeterministic planning (mainly based on model checking). In this paper we: (1) show that probabilistic and nondeterministic planning are extremes of a rich continuum of problems that deal simultaneously with risk and (Knightian) uncertainty; (2) obtain a unifying model for these pro...

Regulating Nonlinear Environmental Systems under Knightian Uncertainty