Free-Entry and Stability in a Cournot Model

In a Cournot model for a single homogeneous good, we study simultaneously two stability properties of a Cournot equilibrium: the stability of a continuous quantity adjustment process with a fixed number of firms and the stability relative to entry. Under usual assumptions, we show that these two properties are consistent--i.e., there exists an equilibrium that is stable in both senses--and determine quite sharply the number of active firms.