Empirical Framework for Cournot Oligopoly with Private Information

We propose an empirical framework for a Cournot-oligopoly model where firms have private information about their own marginal costs. Considering a linear demand with random intercept, we characterize the Bayesian Cournot-Nash equilibrium and determine testable implications from the joint distribution of the equilibrium quantities and price. Then we establish the identification of parameters that include the distributions of the demand and the firm-specific cost shocks. Our identification approach relies on the strict monotonicity of the equilibrium strategies and provides natural estimators that we apply to the global crude-oil market, where we find evidence of cost-asymmetry and private information among producers. We extend our results to allow either firm-specific conduct parameters, selective entry, or nonlinear demand