Conjectures between Two Cournot Firms with Symmetric Information and Their Risk-taking Behaviours

Abstract

This paper introduces the simple and standard Cournot duopoly model in a symmetric situation in which each firm has the same information on the cost function of its rival. This paper considers two types of firms’ risk-taking behaviours and two classes of symmetric information. First, we consider that both firms are risk neutral and have perfect information. In this case, we obtain a unique Cournot equilibrium. Second, when both firms are risk neutral and have partial information, that is, each firm’s set of information changes from perfect to partial information, the number of equilibrium changes from one to four compared to case 1. Third, when both firms are risk averse and have perfect information, that is, firms’ risk taking behaviours change from risk neutral to risk averse, the number of equilibrium changes from one to three compared to case 1. Therefore, both firms’ information structure and risk taking behaviours affect their optimal output strategies.