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Empirical Framework for Cournot Oligopoly with Private Information by Aryal, Gaurab; Zincenko, Federico is a scholarly article available to read on EtoBox.

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We propose an empirical framework for asymmetric Cournot oligopoly with private information about variable costs. First, considering a linear demand for a homogenous product with a random intercept, we characterize the Bayesian Cournot-Nash equilibrium. Then we establish the identification of the joint distribution of demand and firm-specific cost distributions. Following the identification steps, we propose a likelihood-based estimation method and apply it to the global market for crude-oil and quantify the welfare effect of private information. We also consider extensions of the model to include either product differentiation, conduct parameters, nonlinear demand, or selective entry.

Author

Aryal, Gaurab; Zincenko, Federico

Published

2021

Language

EN