Bayesian-Cournot Competition

We consider a model of Cournot competition where firms have incomplete information about their rivals’ costs. The equilibrium concept we use is that of Bayesian-Nash equilibrium. Our analysis is particularly novel since we recognise that each firm’s payoff is determined by its strategy choice and the unweighted sum of all firms’ strategy choices. By exploiting this "aggregative structure", we are able to characterise equilibria in a very simple way, and based on this characterisation we develop sufficient conditions under which there is a unique equilibrium. A comparative statics analysis is also carried out.