Nonlinear Dynamics in a Cournot Duopoly with Different Attitudes towards Strategic Uncertainty

Luciano Fanti, Luca Gori (luca.gori@unipi.it) and Mauro Sodini

Abstract and Applied Analysis, 2013, vol. 2013, 1-11

Abstract:

This paper analyses the dynamics of a duopoly with quantity-setting firms and different attitudes towards strategic uncertainty. By following the recent literature on decision making under uncertainty, where the Choquet expected utility theory is adopted to allow firms to plan their strategies, we investigate the effects of the interaction between pessimistic and optimistic firms on economic dynamics described by a two-dimensional map. In particular, the study of the local and global behaviour of the map is performed under three assumptions: (1) both firms have complete information on the market demand and adjust production over time depending on past behaviours (static expectations—“best reply” dynamics); (2) both firms have incomplete information and production is adjusted over time by following a mechanism based on marginal profits; and (3) one firm has incomplete information on the market demand and production decisions are based on the behaviour of marginal profits, and the rival has complete information on the market demand and static expectations. In cases 2 and 3 it is shown that complex dynamics and coexistence of attractors may arise. The analysis is carried forward through numerical simulations and the critical lines technique.

Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://downloads.hindawi.com/journals/AAA/2013/323290.pdf (application/pdf)
http://downloads.hindawi.com/journals/AAA/2013/323290.xml (text/xml)

Related works:
Journal Article: Nonlinear Dynamics in a Cournot Duopoly with Different Attitudes towards Strategic Uncertainty (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hin:jnlaaa:323290

DOI: 10.1155/2013/323290

Access Statistics for this article

More articles in Abstract and Applied Analysis from Hindawi
Bibliographic data for series maintained by Mohamed Abdelhakeem (mohamed.abdelhakeem@hindawi.com).