- AN EVOLUTIONARY MODEL OF BERTRAND OLIGOPOLY
Ana Ania (),
Carlos Alós-Ferrer () and
Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)
We analyze the long-run outcome of markets in which boundedly rational firms with a decreasingreturns to scale technology compete in prices. The behavior of these firms is based on limitation ofsuccess and experimentation. In this framework, we introduce a new approach to model boundedlyrational behavior, based on the idea of behavioral principles, i.e. formal descriptions. Even with thesimplest ones, the result is that the prices announced are a strict refinement of the set of Nashequilibria. With more sophisticated behavioral principles, the long-run outcome corresponds to theconcept of central prices (wich are also Nash equilibria) introduced here. This is a robust andclear-cut prediction wich, under quadratic costs and arbitrary demand, essentially coincides with theWalrasian equilibrium.
Keywords: evolution; mutation; imitation (search for similar items in EconPapers)
Pages: 28 pages
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Published by Ivie
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http://www.ivie.es/downloads/docs/wpasad/wpasad-1998-14.pdf Fisrt version / Primera version, 1998 (application/pdf)
Journal Article: An Evolutionary Model of Bertrand Oligopoly (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:1998-14
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