A game-theoretic model in which multiple producers compete a la Cournot by choosing quantities of a homogeneous good to supply to geographically separated markets, while a centralized market maker routes the good over a finite-capacity transport network to maximize social welfare. Students learn when Nash equilibria exist and are essentially unique via an exact potential-game structure under affine demand and Walrasian welfare, and the core structural theorem that equilibrium price differences between markets force the connecting links to be saturated, with flow always moving from lower- to higher-priced markets, tying price bottlenecks to critical cuts in the network.
This paper studies a networked Cournot oligopoly in which several producers each choose how much of a homogeneous good to supply to geographically separated markets, while an additional player, the m…