A discontinuous model of duopoly with isoelastic demand and innovation costs

Fabio Lamantia, Mario Pezzino (), Bruno Scardamaglia and Fabio Tramontana

Chaos, Solitons & Fractals, 2022, vol. 158, issue C

Abstract: The paper studies the dynamic properties of a duopoly game in which firms strategically compete in quality-enhancing innovation investments and quantities. Market demands are assumed to be isolastic (reciprocal to the price) functions. The non-linearity of the demand functions, as already highlighted by T. Puu in [11], suggests the existence of complicated dynamics (cyclical or chaotic) in a standard dynamic Cournot duopoly. In addition to this, competition in innovation introduces the presence of discontinuities in the best response functions, expanding the set of possible equilibria (including asymmetric and multiple ones) of the standard Cournot duopoly and further enriching the dynamic features of the model.

Keywords: Discontinuous best response functions; Non-linear demand functions; Dynamic global analysis; Learning (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:chsofr:v:158:y:2022:i:c:s0960077922002259

DOI: 10.1016/j.chaos.2022.112015

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