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Long run equilibria in an asymmetric oligopoly

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  • Yasuhito Tanaka

    ()
    (Faculty of Law, Chuo University, 742-1, Higashinakano, Hachioji, Tokyo, 192-03, JAPAN)

Abstract

Consider an oligopolistic industry composed of two groups (or populations) of firms, the low cost firms and the high cost firms. The firms produce a homogeneous good. I study the finite population evolutionarily stable strategy defined by Schaffer (1988), and the long run equilibrium in the stochastic evolutionary dynamics based on imitation and experimentation of strategies by firms in each group. I will show the following results. 1) The finite population evolutionarily stable strategy (ESS) output is equal to the competitive (or Walrasian) output in each group of the firms. 2) Under the assumption that the marginal cost is increasing, the ESS state is the long run equilibrium in the stochastic evolutionary dynamics in the limit as the output grid step, which will be defined in the paper, approaches to zero.

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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 14 (1999)
Issue (Month): 3 ()
Pages: 705-715

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Handle: RePEc:spr:joecth:v:14:y:1999:i:3:p:705-715

Note: Received: September 19, 1997; revised: June 18, 1998
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Related research

Keywords: Asymmetric oligopoly; Finite population evolutionarily stable strategy; Long run equilibrium.;

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Cited by:
  1. Apesteguia, Jose & Huck, Steffen & Oechssler, Jörg & Weidenholzer, Simon, 2007. "Imitation and the Evolution of Walrasian Behavior: Theoretically Fragile but Behaviorally Robust," Sonderforschungsbereich 504 Publications 07-69, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  2. Carlos Alós-Ferrer, 2001. "Cournot versus Walras in Dynamic Oligopolies with Memory," Vienna Economics Papers 0110, University of Vienna, Department of Economics.
  3. Tanaka, Yasuhito, 2001. "Evolution to equilibrium in an asymmetric oligopoly with differentiated goods," International Journal of Industrial Organization, Elsevier, vol. 19(9), pages 1423-1440, November.
  4. Ana B. Ania, 2005. "Evolutionary stability and Nash equilibrium in finite populations, with an application to price competition," Vienna Economics Papers 0601, University of Vienna, Department of Economics.
  5. Fernando Vega-Redondo, 1999. "Markets under bounded rationality: from theory to facts," Investigaciones Economicas, Fundación SEPI, vol. 23(1), pages 3-26, January.
  6. Tanaka, Yasuhito, 2000. "Stochastically stable states in an oligopoly with differentiated goods: equivalence of price and quantity strategies," Journal of Mathematical Economics, Elsevier, vol. 34(2), pages 235-253, October.
  7. Peter Duersch & Albert Kolb & Jörg Oechssler & Burkhard Schipper, 2010. "Rage against the machines: how subjects play against learning algorithms," Economic Theory, Springer, vol. 43(3), pages 407-430, June.
  8. Huang, Weihong, 2011. "Price-taking behavior versus continuous dynamic optimizing," Journal of Economic Behavior & Organization, Elsevier, vol. 78(1), pages 37-50.

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