Question

What can you say, in general, about the Cournot-Nash equilibrium quantities and prices as the number of sellers (n) competing in the industry rises?

Answer 1

In Cournot model, firms compete on quantities and set their prices accordingly. As more firms enter the market, the market size remaining the same, the degree of quantity-competition increases, so each firm gets a lower market share (i.e. each firm's output decreases), market concentration decreases and price converges to a competitive model. Therefore, the higher the number of firms, the lower the output by each firm, the lower the market concentration and the closer the price is to a pure competitive price level.