The Cournot-Theocharis Problem Reconsidered
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Knowledge AreaEconomía Aplicada
SponsorsThe authors 1 and 3 are partially supported by the grant FS 00684/PI/04 from Fundación Séneca (Comunidad Autónoma de la Región de Murcia, Spain)
Bibliographic CitationCÁNOVAS, J.S., PUU, Tönu, RUIZ, Manuel. The Cournot-Theocharis Problem Reconsidered. Chaos, Solitons & Fractals, 37 (4): 1025-1039, Agosto 2008. ISSN 0960-0779
In 1959 Theocharis  showed that with linear demand and constant marginal costs Cournot equilibrium is destabilized when the competitors become more than three. With three competitors the Cournot equilibrium point becomes neutrally stable, so, even then, any perturbation throws the system into an endless oscillation. Theocharis's argument was in fact proposed already in 1939 by Palander . None of these authors considered the global dynamics of the system, which necessarily becomes nonlinear when consideration is taken of the facts that prices, supply quantities, and profits of active firms cannot be negative. In the present paper we address the global dynamics.
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