Approximate Efficiency of Cournot Equilibria in Large Markets.

Ushio, Yoshiaki

The article establishes necessary and sufficient conditions for the approximate efficiency of Cournot equilibria in large markets. The analysis is carried out in the partial equilibrium framework of a market for a homogeneous commodity. The efficiency properties of Cournot equilibria in large finite economies have been much explored in the past few years by a number of authors. These authors usually assume that a large economy contains a large number of consumers, but they make different assumptions about the number of firms in such an economy. The article focus attention on a single market for a homogeneous commodity and replicate consumers and firms at different rates. By so doing we unify and extend the previous results on the approximate efficiency of Cournot equilibria in large markets. More specifically, we find the number of firms, relative to the number of consumers, that is necessary and/or sufficient for the per capita welfare loss associated with any Cournot equilibrium to be approximately zero. The analysis is carried out under fairly weak assumptions about cost and inverse demand functions. In particular, while the previous analyses make use of the concept of a competitive equilibrium in a well-defined limit economy, our results do not depend on the existence of such an equilibrium.

MARKETS; ECONOMIC equilibrium; EQUILIBRIUM; COMMERCIAL products; CONSUMERS; BUSINESS enterprises; COMMERCE; ECONOMICS

Review of Economic Studies, 1985, Vol 52, Issue 4, p547

0034-6527

Academic Journal

10.2307/2297731