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The coexistence of stable equilibria under least squares learning

Dávid Kopányi ()

Journal of Economic Behavior & Organization, 2017, vol. 141, issue C, 277-300

Abstract: In this paper we consider firms that learn about market conditions by estimating the demand function using past market data. We show that learning may lead to suboptimal outcomes even when the estimated demand function perfectly fits the observations used in the regression and firms thus perceive to have learned the demand function correctly.

Keywords: Salop model; Least squares learning; Heterogeneous consumers (search for similar items in EconPapers)
JEL-codes: C62 C63 C72 L13 (search for similar items in EconPapers)
Date: 2017
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Working Paper: The Coexistence of Stable Equilibria under Least Squares Learning (2015) Downloads
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DOI: 10.1016/j.jebo.2017.06.005

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Handle: RePEc:eee:jeborg:v:141:y:2017:i:c:p:277-300