An Evolutionary Model of Price Competition Among Spatially Distributed Firms

Ludo Waltman (), Nees Eck (), Rommert Dekker and Uzay Kaymak ()

Computational Economics, 2013, vol. 42, issue 4, 373-391

Abstract: Various studies have shown the emergence of cooperative behavior in evolutionary models with repeated local interaction among spatially distributed agents. We investigate to what extent these findings generalize to evolutionary models of price competition among spatially distributed firms. We consider both one- and two-dimensional models, and we vary the amount of information firms have about competitors in their neighborhood. Our computer simulations show that the emergence of cooperative behavior depends strongly on the amount of information available to firms. Firms tend to behave most cooperatively if they have only a very limited amount of information about their competitors. We provide an intuitive explanation for this phenomenon. Our simulations further indicate that three other factors in our models, namely the accuracy of firms’ information, the probability of experimentation, and the spatial distribution of consumers, have little effect on the emergence of cooperative behavior. Copyright Springer Science+Business Media New York 2013

Keywords: Cooperation; Evolutionary model; Price competition; Simulation; Spatial model (search for similar items in EconPapers)
Date: 2013
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Working Paper: An evolutionary model of price competition among spatially distributed firms (2011)
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DOI: 10.1007/s10614-012-9358-3

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