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Imitation Dynamics in Oligopoly Games with Heterogeneous Players

Author

Listed:
  • Daan Lindeman
  • Marius I. Ochea

    (Université de Cergy-Pontoise, THEMA)

Abstract

We investigate the role and performance of imitative behaviour in a class of quantity- setting Cournot games. Within a framework of evolutionary competition between ra- tional, best-response and imitators players we found that the equilibrium stability de- pends on the intensity of the evolutionary pressure and on the stability of the cheapest heuristic. When the cheapest behavioural rule is the stable heuristic (i.e. imitation), the dynamics converge to a situation where most rms use this behavioural rule and all rms produce the Cournot-Nash equilibrium quantity. When the cheapest heuristic is unstable one (i.e. best-response), complicated endogenous uctuations may occur along with the co-existence of heuristics.

Suggested Citation

  • Daan Lindeman & Marius I. Ochea, 2018. "Imitation Dynamics in Oligopoly Games with Heterogeneous Players," THEMA Working Papers 2018-15, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    • Handle: RePEc:ema:worpap:2018-15
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    References listed on IDEAS

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    1. Cars H. Hommes & Marius I. Ochea & Jan Tuinstra, 2018. "Evolutionary Competition Between Adjustment Processes in Cournot Oligopoly: Instability and Complex Dynamics," Dynamic Games and Applications, Springer, vol. 8(4), pages 822-843, December.
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    5. William A. Brock & Cars H. Hommes, 2001. "A Rational Route to Randomness," Chapters, in: W. D. Dechert (ed.), Growth Theory, Nonlinear Dynamics and Economic Modelling, chapter 16, pages 402-438, Edward Elgar Publishing.
    6. R. D. Theocharis, 1960. "On the Stability of the Cournot Solution on the Oligopoly Problem," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 27(2), pages 133-134.
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    More about this item

    Keywords

    Competing heuristics; Imitation; Evolutionary dynamics.;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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