ELASTIC DEMAND, SUNK COSTS AND THE KREPS-SCHEINKMAN EXTENSION OF THE COURNOT MODEL

The paper shows that, with any rationing mechanism between the efficie nt and proportional extremes, the Kreps-Scheinkman two-stage quantity- price game reduces to the Cournot model if demand is uniformly elastic and if all costs are sunk at the first stage, thus providing positive results to set against existing negative statements.