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Adaptive rules for discrete-time Cournot games of high competition level markets

Nikolaos Chrysanthopoulos () and George P. Papavassilopoulos ()
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Nikolaos Chrysanthopoulos: City, University of London
George P. Papavassilopoulos: National Technical University of Athens

Operational Research, 2021, vol. 21, issue 4, No 24, 2879-2906

Abstract: Abstract For the Cournot-like oligopoly games of n firms, where the Cournot adjustment fails to converge, we propose adjustment processes originating from the family of the Moving Averages. In markets of linear demand, where firms have private and linear on quantities cost functions, these adaptive rules turn the games into discrete-time linear systems with delays. With an out of the box proof, we determine the least number of delays (m) that ensures the game of n players converges to its equilibrium. The Simple Moving Average rule (fixed number of delays) and the Cumulative Moving Average rule (constantly increasing number of delays), which is also known as “fictitious play”, are the main rules considered. Along with a hybrid rule, result of their combination, they are all studied for their convergent properties and compared in a bench-marking framework to indicate the different trajectories and identify their suitability in applications.

Keywords: Adaptation; Cournot game; Bounded rationality; Fictitious play; Convergence; Energy markets; 91A06; 91A50; 37N40 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s12351-019-00522-z

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