A Note on the Desirability of the Supply Function Competition with Demand Uncertainty

In this paper, we formalize a prediction of Klemperer and Meyer (1989) as to the possibility that in the presence of demand uncertainty the expected profits under the supply function competition may result in higher expected oligopoly profits than under the stochastic Cournot competition and investigate how this possibility is affected by certain attributes of the oligopolistic industry, such as the number of firms, the cost of producing a unit output, and the slope of the demand curve.