The Empirical Content of Cournot Competition

Abstract

We consider the testable implications of the Cournot model of market competition. Our approach is nonparametric in that we abstain from imposing any functional specication on market demand and rm cost functions. We derive necessary and sufficient conditions for (reduced form) equilibrium market price and quantity functions to be consistent with the Cournot model. In addition, we present identi cation results for the corresponding inverse market demand function and the rm cost functions. Finally, we use our approach to derive testable restrictions for the models of perfect competition, collusion and conjectural variations. is identi es the conditions under which these different models are empirically distinguishable from the Cournot model.