ON A COURNOT DUOPOLY GAME WITH DIFFERENTIATED GOODS, HETEROGENEOUS EXPECTATIONS AND A COST FUNCTION INCLUDING EMISSION COSTS

Georges Sarafopoulos () and Kosmas Papadopoulos ()
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Georges Sarafopoulos: Department of Economics, Democritus University of Thrace, Greece
Kosmas Papadopoulos: Department of Economics, Democritus University of Thrace, Greece

Scientific Bulletin - Economic Sciences, 2017, vol. 16, issue 1, 11-22

Abstract: In this study we investigate the dynamics of a nonlinear Cournot- type duopoly game with differentiated goods, linear demand and a cost function that includes emission costs. The game is modeled with a system of two difference equations. Existence and stability of equilibria of this system are studied. We show that the model gives more complex chaotic and unpredictable trajectories as a consequence of change in the parameter of horizontal product differentiation and a higher (lower) degree of product differentiation (weaker or fiercer competition) destabilize (stabilize) the economy. The chaotic features are justified numerically via computing Lyapunov numbers and sensitive dependence on initial conditions. Also, we show that in this case there are stable trajectories and a higher (lower) degree of product differentiation does not tend to destabilize the economy.

Keywords: Cournot duopoly game; Discrete dynamical system; Heterogeneous expectations; Stability; Chaotic behavior. (search for similar items in EconPapers)
JEL-codes: C62 C72 D43 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pts:journl:y:2017:i:1:p:11-22

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