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The effect of price discrimination on dynamic duopoly games with bounded rationality

Song Qi-Qing (), Zhang Wei-li, Jiang Yi-Rong and Geng Juan
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Song Qi-Qing: School of Mathematics and Computer Science, Shanxi Normal University, Linfen 041004, China
Zhang Wei-li: School of Management Science and Engineering, Dongbei University of Finance and Economics, Dalian 116025, China
Jiang Yi-Rong: College of Science, Guilin University of Technology, Guilin 541004, China
Geng Juan: College of Mathematics and Statistics, Hebei University of Economics and Business, Shijiazhuang 050064, China

Studies in Nonlinear Dynamics & Econometrics, 2022, vol. 26, issue 2, 287-311

Abstract: In a homogenous product market, customers’ different demand elasticities may lead to different prices. This study examined price discrimination’s effect on equilibrium points in Cournot duopoly games by assuming that each firm charges K prices and adjusts its strategies based on bounded rationality. In consideration of price discrimination, two discrete dynamic game systems with 2K variables were introduced for players with homogenous or heterogenous expectations. The stability of the Nash equilibrium point was found to be independent of price discrimination. Given price discrimination, the stability of boundary stationary points for the system with homogenous players is different from that for the system with heterogenous players. Numerical simulations verified the critical point for the system with homogenous players from being stable to its bifurcation.

Keywords: bounded rationality; dynamic Cournot games; Nash equilibrium; oligopoly; price discrimination (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1515/snde-2019-0137

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