An Evolutionary Model of Bertrand Oligopoly
AbstractWe 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.
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Bibliographic InfoArticle provided by Elsevier in its journal Games and Economic Behavior.
Volume (Year): 33 (2000)
Issue (Month): 1 (October)
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Web page: http://www.elsevier.com/locate/inca/622836
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