A Dynamic Cournot Model of Multiple Manufacturers with Different Marginal Cost

Abstract

According to previous studies, we establish a general dynamic Cournot model of multiple manufacturers with different marginal cost and give its mathematical expression. The dynamic Cournot model is be extended to the more general case because the number of manufacturer is changed from two with zero margin cost to multiple with different margin cost. Then we solve equilibrium quantity of manufacturer for each stage. Under various conditions the game equilibriums are compared through the numerical examples. It will not only better reflect the broader realistic cases, but it is beneficial to formulate production decision tools for manufacturers. The conclusions are drawn as follows. Firstly, the equilibrium quantity of manufacturers will tend to a certain same value with the same marginal cost by repeated game. Secondly, there is negative relationship between the final equilibrium quantity and the marginal cost. Finally, the manufacturers with lower marginal quantity cost are able to produce more products and gain more profits than other manufacturers when the market price is certain, so the lower cost manufacturers have a cost competitive advantage.