The dynamics of a differentiated duopoly with quantity competition

Luciano Fanti and Luca Gori ()

Economic Modelling, 2012, vol. 29, issue 2, 421-427

Abstract: We analyse the dynamics of a Cournot duopoly with heterogeneous players to investigate the effects of micro-founded differentiated products demand on stability. The present study, which indeed modifies and extends Zhang et al. (2007) (Zhang, J., Da, Q., Wang, Y., 2007. Analysis of nonlinear duopoly game with heterogeneous players. Economic Modelling 24, 138–148) and Tramontana, F., (2010) (Tramontana, F., 2010. Heterogeneous duopoly with isoelastic demand function. Economic Modelling 27, 350–357), reveals that a higher degree of product differentiation may destabilise the market equilibrium. Moreover, we show that a cascade of flip bifurcations may lead to periodic cycles and ultimately chaotic behaviours. Since a higher degree of product differentiation implies weaker competition, then a theoretical implication of our findings, that also constitute a policy warning, is that a fiercer (weaker) competition tends to stabilise (destabilise) the unique positive Cournot–Nash equilibrium.

Keywords: Bifurcation; Chaos; Cournot; Oligopoly; Product differentiation (search for similar items in EconPapers)
JEL-codes: C62 D43 L13 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

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Working Paper: The dynamics of a differentiated duopoly with quantity competition (2011)
Working Paper: The dynamics of a differentiated duopoly with quantity competition (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:29:y:2012:i:2:p:421-427

DOI: 10.1016/j.econmod.2011.11.010

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