We study communication in a static Cournot duopoly model under the assumption that firms have unverifiable private information about their costs. We show that cheap talk between the firms cannot transmit any information. However, if the firms can communicate through a third party, communication can be informative even when it is not substantiated by any commitment or costly actions. We exhibit ...

In the framework of symmetric Cournot oligopoly, this paper provides two minimal sets of assumptions on the demand and cost functions that imply respectively that, as the number of firms increases, the minimal and maximal equilibria lead to (i) decreasing industry price and increasing or decreasing per-firm output; and (ii) increasing industry price (and decreasing per firm output.) In both cas...

A large body of literature has accumulated which examines how the optimal solution of an agent maximizing the expectation of a real-valued function, depending on a random parameter p and the agent's behavior x, reacts to perturbations in the first and second moments of p. Here, by an approximation valid for small uncertainty, we allow many agents and consider their behavior in a Cournot-Nash eq...

This paper summarizes some recent research pertaining to laboratory markets, and then discusses some of the implications of this research for applied economics and policy. Three results are discussed: (a) In one-sided markets where sellers post prices price-tracking response to demand shocks is very poor; (b) Despite the prominence of the Cournot model as a centerpiece for applied research, it ...

We study the merger paradox, a relative of Harsanyi’s bargaining paradox, in an experiment. We examine bilateral mergers in experimental Cournot markets with initially three or four firms. Standard Cournot-Nash equilibrium predicts total outputs well. However, merged firms produce significantly more output than their competitors. As a result, mergers are not unprofitable. By analysing control t...