Controlling Chaos Through Local Knowledge

Ahmad Naimzada and Fabio Tramontana

No 810, Working Papers from University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini

Abstract: We propose an duopoly game where quantity-setting firms have incomplete information about the demand function. In each time step, they solve a profit maximization problem assuming a linear local approximation of the demand function. In particular, we construct an example using the well known duopoly Puu's model with isoelastic demand function and constant marginal costs. An explicit form of the dynamical system that describes the time evolution of the duopoly game with boundedly rational players is given. The main result is the global stability of the system.

Keywords: Cournot duopoly; incomplete information; isoelastic demand function; time evolution; boundedly rational players. (search for similar items in EconPapers)
JEL-codes: C61 C62 D83 L13 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2008, Revised 2008
New Economics Papers: this item is included in nep-knm
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Citations: View citations in EconPapers (5)

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Journal Article: Controlling chaos through local knowledge (2009)
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