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Essays on duopoly competition with asymmetric firms: Is profit maximization always an evolutionary stable strategy?

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  • Silveira, Douglas
  • Vasconcelos, Silvinha

Abstract

We propose both a well-mixed and spatially-structured evolutionary game to analyze the competitive behavior of retail firms in duopolistic markets. Firms from two different populations (high/low efficiency) compete and the available strategies are (i) Profit or (ii) Revenue maximization. Under bounded-rationality assumptions, firms can update their behavior through dynamic learning mechanisms. In addition to a replicator dynamics approach, we develop an Agent-based model to increase realism and to capture possible spatial effects on firms’ strategic behavior. A convergence between the methods is observed and, given specific conditions, Revenue maximization may corresponds to an Evolutionary Stable Strategy (ESS).

Suggested Citation

  • Silveira, Douglas & Vasconcelos, Silvinha, 2020. "Essays on duopoly competition with asymmetric firms: Is profit maximization always an evolutionary stable strategy?," International Journal of Production Economics, Elsevier, vol. 225(C).
    • Handle: RePEc:eee:proeco:v:225:y:2020:i:c:s0925527319304293
    DOI: 10.1016/j.ijpe.2019.107592
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    More about this item

    Keywords

    Competition; Evolutionary game; Agent-based model;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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