Complex Dynamics in Simple Cournot Duopoly Games

Diana A. Mendes (), Vivaldo M. Mendes () and Orlando Gomes
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Diana A. Mendes: ISCTE - Department of Quantitative Methods and UNIDE-StatMath
Vivaldo M. Mendes: ISCTE - Department of Economics and UNIDE-ERC

No ercwp1008, Working Papers Series 1 from ISCTE-IUL, Business Research Unit (BRU-IUL)

Abstract: The main aim of this paper is to analyse the dynamics of nonlinear discrete-time maps generated by duopoly games with heterogeneous and quadratic cost functions, in which players do not form expetations about the rival’s actions accordingto the ratioal expectations hypothesis. We discusse here two cases. In the first one we introduce games with boundedly rational players and in the second one games with adaptive expectations. The dynamics are mainly analysed by numerical simulations. There are always multiple equilibria, and the significance of the Nash equilibria is pointed out.

Pages: 14 pages
Date: 2008-06-15
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