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Stability of Cournot equilibria under discrete best-reply dynamics with non-negative output constraints

Hsiao-Chi Chen and Yunshyong Chow

Economics Letters, 2016, vol. 149, issue C, 172-175

Abstract: This paper explores the stability of Cournot equilibria under discrete best-reply dynamics with non-negative output constraints. When firms produce complement goods, Cournot equilibria are the unique and globally stable solutions of the dynamics under some stability conditions, and all firms will survive in the long run regardless of their efficiency levels. By contrast, if firms produce substitute goods, Cournot equilibria are neither the limit of the dynamics nor stable unless all firms are efficient enough.

Keywords: Best-reply; Complement; Cournot equilibrium; Stability; Substitute (search for similar items in EconPapers)
JEL-codes: C62 C72 (search for similar items in EconPapers)
Date: 2016
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