ABSTRACT
Karl Aiginger analyzed the statistical relationship between price–cost margins and market shares, and price–cost margins and the elasticity of demand to determine whether these relationships were consistent with the implications of the Cournot–Nash model. Several case studies of real-world markets suggest the possibility of Cournot–Nash pricing. In the 1980s, however, Elhanan Helpman and Paul R. Krugman developed “new trade theories” that assumed international trade markets are imperfectly competitive. John James Mora found that pricing in the Colombia cellphone market between 1995 and 2001 was consistent with Cournot behavior. The authors have developed the Cournot–Nash equilibrium for a duopoly, but the result can be generalized to any number of identical firms. Michael R. Baye and John Morgan developed a theoretical model in which even relatively small levels of bounded rationality on the part of sellers can result in price offers that diverge and fail to move toward the Bertrand equilibrium.
