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An evolutionary Cournot oligopoly model with imitators and perfect foresight best responders

Lorenzo Cerboni Baiardi and Ahmad Naimzada ()

Metroeconomica, 2019, vol. 70, issue 3, 458-475

Abstract: We consider the competition among quantity setting players in a linear evolutionary environment. To set their outputs, players adopt, alternatively, the best response rule having perfect foresight or an imitative rule. Players are allowed to change their behavior through an evolutionary mechanism according to which the rule with better performance will attract more followers. The relevant stationary state of the model describes a scenario where players produce at the Cournot‐Nash level. Due to the presence of imitative behavior, we find that the number of players and implementation costs, needed to the best response exploitation, have an ambiguous role in determining the stability properties of the equilibrium and double stability thresholds can be observed. Differently, the role of the intensity of choice, representing the evolutionary propensity to switch to the most profitable rule, has a destabilizing role, in line with the common occurrence in evolutionary models. The global analysis of the model reveals that increasing values of the intensity of choice parameter determine increasing dynamic complexities for the internal attractor representing a population where both decision mechanisms coexist.

Date: 2019
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https://doi.org/10.1111/meca.12264

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