Renegotiation in the repeated Cournot model (Q2387309)

The authors explore a new concept of a Partially Symmetric Weak Renegotiation Proof equilibrium (PSWRP). They introduce necessary and sufficient conditions for a symmetric payoff vector to be PSWRP (payoff associated with PSWRP-equilibria are called PSWRP-payoff). It is shown that the PSWRP concept significantly limits the cooperative outcomes that can be sustained. In particular, for any discount factor, the symmetric monopoly outcome cannot be sustained by a PSWRP equilibrium when the number of players is high enough (9 in the linear demand case). When the number of players tends to infinity (even for a discount factor arbitrarily close to 1), (i) the collusive benefits that could be sustained as a PSWRP equilibrium are, at most, four times the Cournot benefits; (ii) the ``reasonable collusive price'' that can be sustained in equilibrium tends to the Cournot price.