Aggregation of Information in Large Cournot Markets.

Consider a homogeneous product market where firms have private information about an uncertain demand parameter and compete in quan tities. The author examines the convergence properties of Bayesian-Co urnot equilibria as the economy is replicated and concludes that larg e Cournot (or almost competitive) markets do not aggregate informatio n efficiently except possibly when the production technology exhibits constant returns to scale. A competitive market is nevertheless cons trained efficient when taking as given the decentralized private info rmation structure of the economy. The results are shown to be robust to the consideration of endogenous information acquisition and to the addition of extra rounds of competition. Copyright 1988 by The Econometric Society.