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Cooperative oligopoly games with boundedly rational firms

Paraskevas Lekeas and Giorgos Stamatopoulos ()

Annals of Operations Research, 2014, vol. 223, issue 1, 255-272

Abstract: We analyze cooperative Cournot games with boundedly rational firms. Due to cognitive constraints, the members of a coalition cannot accurately predict the coalitional structure of the non-members. Thus, they compute their value using simple heuristics. In particular, they assign various non-equilibrium probability distributions over the outsiders’ set of partitions. We construct the characteristic function of a coalition in such an environment and we analyze the core of the corresponding games. We show that the core is non-empty provided the number of firms in the market is sufficiently large. Moreover, we show that if two distributions over the set of partitions are related via first-order dominance, then the core of the game under the dominated distribution is a subset of the core under the dominant distribution. Copyright Springer Science+Business Media New York 2014

Keywords: Cooperative game; Externalities; Cournot market; Core; Bounded rationality; C71; L2 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s10479-014-1580-z

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