International Journal of Business and Economics Volume 8, No. 1 April​, 2009

Constant Best-Response Functions: Interpreting Cournot

Zivan Forshner

Department of Economics, University of Haifa, Israel

Oz Shy

Research Department, Federal Reserve Bank of Boston, U.S.A.

Abstract

Following Amir and Grilo (1999), we characterize a class of demand functions that generate constant quantity best-response functions. We examine implications of constant best-response functions for the invariance of equilibrium outcomes with respect to the assumed market structure of quantity games. We argue that, unlike the class of linear demand functions, this class of demand functions supports the pure interpretation of Cournot conjectures.

Keywords：constant best-response functions, Cournot equilibrium, Cournot conjectures, Stackelberg equilibrium.

JEL Classifications：C72, D43.

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