Convergence to Walrasian equilibrium with minimal information

Ratul Lahkar ()

Journal of Economic Interaction and Coordination, 2020, vol. 15, issue 3, No 1, 553-578

Abstract: Abstract We consider convergence to Walrasian equilibrium in a situation where firms know only market price and their own cost function. We term this a situation of minimal information. We model the problem as a large population game of Cournot competition. The Nash equilibrium of this model is identical to the Walrasian equilibrium. We apply the best response (BR) dynamic as our main evolutionary model. This dynamic can be applied under minimal information as firms need to know only the market price and the their own cost to compute payoffs. We show that the BR dynamic converges globally to Nash equilibrium in an aggregative game like the Cournot model. Hence, it converges globally to the Walrasian equilibrium under minimal information. We extend the result to some other evolutionary dynamics using the method of potential games.

Keywords: Aggregative games; Cournot competition; Best response dynamic (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s11403-019-00243-8

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