A Nonparametric Test of Strategic Behavior in the Cournot Model

Posted: 4 Aug 2009

See all articles by Rahul Deb

Rahul Deb

University of Toronto

James E. Fenske

University of Oxford - Department of Economics

Date Written: July 29, 2009

Abstract

We devise a nonparametric test of strategic behavior in a multiproduct Cournot oligopoly. It is assumed that firms have cost functions that do not change over the period of observation but that market demand can change in each period. Market prices and firm-specific production quantities are observed and it is assumed that neither the inverse demand functions nor the cost functions are known. The driving assumptions of the test are that market inverse demand functions are decreasing and differentiable at each period and that cost functions are increasing and convex for each firm. Under these very general conditions, we show that this test imposes strong restrictions on observed data. We apply the test to the crude oil market and find that strategic behavior is strongly rejected.

Keywords: competitive behavior, multiproduct Cournot oligopoly, nonparametric test, crude oil market, OPEC

JEL Classification: C14, C72, D21, D43

Suggested Citation

Deb, Rahul and Fenske, James E., A Nonparametric Test of Strategic Behavior in the Cournot Model (July 29, 2009). Available at SSRN: https://ssrn.com/abstract=1440983 or http://dx.doi.org/10.2139/ssrn.1440983

Rahul Deb (Contact Author)

University of Toronto ( email )

Toronto, Ontario M5S 3G8
Canada

HOME PAGE: http://www.economics.utoronto.ca/debrahul/

James E. Fenske

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
337
PlumX Metrics