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Efficiency and surplus bounds in Cournot competition

2003; Elsevier BV; Volume: 113; Issue: 2 Linguagem: Inglês

10.1016/s0022-0531(03)00089-9

1095-7235

Simon P. Anderson, Régis Renault,

Economic theories and models

We derive bounds on the ratios of deadweight loss and consumer surplus to producer surplus under Cournot competition. To do so, we introduce a parameterization of the degree of curvature of market demand using the parallel concepts of ρ-concavity and ρ-convexity. The “more concave” is demand, the larger the share of producer surplus in overall surplus, the smaller is consumer surplus relative to producer surplus, and the lower the ratio of deadweight loss to producer surplus. Deadweight loss over total potential surplus is at first increasing with demand concavity, then eventually decreasing.