A Continuous Approach to Oligopolistic Market Equilibrium

Sjur D. Flåm and Adi Ben-Israel
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Sjur D. Flåm: University of Bergen, Bergen, Norway
Adi Ben-Israel: Rutgers University, New Brunswick, New Jersey

Operations Research, 1990, vol. 38, issue 6, 1045-1051

Abstract: We provide an algorithm for computing Cournot-Nash equilibria in a market that involves finitely many producers. The algorithm amounts to following a certain dynamical system all the way to its steady state, which happens to be a noncooperative equilibrium. The dynamics arise quite naturally as follows. Let each producer continuously adjust the planned production, if desired, as a response to the current aggregate supply. In doing so, the producer is completely guided by myopic profit considerations. We show, under broad hypothesis, that this adjustment process is globally, asymptotically convergent to a Nash equilibrium.

Keywords: games/group theory; noncooperative: equilibria in Cournot oligopolies; programming; nonlinear: algorithm for computing equilibria with nonsmooth data (search for similar items in EconPapers)
Date: 1990
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