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[ Article ] | |
Seoul Journal of Economics - Vol. 24, No. 1, pp. 73-86 | |
Abbreviation: SJE | |
ISSN: 1225-0279 (Print) | |
Print publication date 28 Feb 2011 | |
Received 24 Feb 2010 Revised 16 Aug 2010 Accepted 25 Aug 2010 | |
Conjectures in Cournot Duopoly under Cost Uncertainty | |
Suyeol Ryu ; Iltae Kim
| |
Assistant Professor, Department of Economics, Andong National University, Andong 760-749, Korea, Tel: +82-54-820-6209, Fax: +82-54-823-1623 (syryu@andong.ac.kr) | |
Corresponding Author, Professor, Department of Economics, Chonnam National University, Gwangju 500-757, Korea, Tel: +82-62-530-1550, Fax: +82-62-530-1559 (kit2603@chonnam.ac.kr) | |
JEL Classification: D81, L13 |
This paper presents a Cournot duopoly model based on a condition when firms are facing cost uncertainty under risk neutrality and risk aversion. Each firm conjectures about the rival’s output level, and its cost function is assumed to be unknown to its rival. The Cournot model shows that the expected utility maximizing firms, under risk aversion, show different behaviors from the expected profit maximizing firms. This implies that each firm can increase or decrease its output, which depends on the interaction between both firms under cost uncertainty, assuming that both firms are risk-averse.
Keywords: Cournot equilibrium, Cost uncertainty, Risk aversion |
The authors wish to thank two anonymous referees for their useful comments.
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