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Evolutionary oligopoly games with heterogeneous adaptive players

Gian Italo Bischi, Fabio Lamantia and Davide Radi ()

Chapter 12 in Handbook of Game Theory and Industrial Organization, Volume I, 2018, pp 343-370 from Edward Elgar Publishing

Abstract: In this chapter, we analyze the properties of evolutionary switching models for oligopoly games, where boundedly rational agents can follow different behavioral rules (or heuristics) to update their production through repeated adaptive decisions. In particular, we focus on well-known heuristics such as best reply with naive expectations, local monopolistic approximation and gradient dynamics on marginal profits. These heuristics are characterized by the property that Nash equilibria are fixed points of the corresponding dynamic processes. The population of firms in the oligopoly is subdivided into fractions of adopters of the different heuristics. Firms are allowed to switch over time between different behavioral rules according to profit-driven evolutionary pressure. The chapter examines some specific examples of evolutionary systems. Coexistence of heterogeneous behaviors as well as oscillatory time patterns are obtained as possible outcomes of the proposed evolutionary models.

Keywords: Economics and Finance (search for similar items in EconPapers)
Date: 2018
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