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An oligopoly model with rational and imitation rules

Lorenzo Cerboni Baiardi and Ahmad Naimzada ()

Mathematics and Computers in Simulation (MATCOM), 2019, vol. 156, issue C, 254-278

Abstract: In the rank of behavioral rules, imitation-based heuristics have received special attention in economics (see Vega-Redondo, 1997; Schlag, 1998). In particular, imitative behavior explains the evidence from experimental oligopolies where the Cournot–Nash equilibrium does not emerge as unique outcome and outputs are placed, for the most part, on fairly competitive levels (see e.g. Apesteguia et al., 2006 and Oechssler et al., 2016). Here, we derive a dynamic model of a linear Cournot oligopoly with a deterministic structure where rational agents having perfect foresight and imitators are present. The Cournot–Nash equilibrium is a stationary state of our models together with a further production level that can be interpreted as the competitive equilibrium in case only imitators are present. We found that the heterogeneities among players influence the stability properties of the Cournot–Nash equilibrium and the arising dynamical scenarios are characterized by similar features as those from experimental outcomes.

Keywords: Imitation; Heterogeneity; Dynamic instability; Dynamical systems (search for similar items in EconPapers)
Date: 2019
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