Convergence in the Finite Cournot Oligopoly with Social and Individual Learning
AbstractConvergence to the Nash equilibrium in a Cournot oligopoly is a question that recurrently arises as a subject of controversy in economics. The development of evolutionary game theory has provided an equilibrium concept more directly connected with adjustment dynamics, and the evolutionary stability of the equilibria of the Cournot game has been extensively studied in the literature. Several articles show that the Walrasian equilibrium is the stable ESS of the Cournot game. But no general result has been established for the difficult case of simultaneous heterogenous mutations.Authors propose specific selection dynamics to analyze this case. Vriend (2000) proposes using a genetic algorithm for studying learning dynamics in this game and obtains convergence to Cournot equilibrium with individual learning. The resulting convergence has been questioned by Arifovic and Maschek (2006). The aim of this article is to clarify this controversy: it analyzes the mechanisms that are behind these contradictory results and underlines the specific role of the spite effect. We show why social learning gives rise to the Walrasian equilibrium and why, in a general setup, individual learning can effectively yield convergence to the Cournot equilibrium. We also illustrate these general results by systematic computational experiments.
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Date of creation: 15 Mar 2009
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Cournot oligopoly; Learning; Evolution; Selection; Evolutionary stability; Nash equilibrium; Genetic algorithms;
Other versions of this item:
- Vallée, Thomas & YIldIzoglu, Murat, 2009. "Convergence in the finite Cournot oligopoly with social and individual learning," Journal of Economic Behavior & Organization, Elsevier, vol. 72(2), pages 670-690, November.
- NEP-ALL-2009-03-28 (All new papers)
- NEP-BEC-2009-03-28 (Business Economics)
- NEP-CMP-2009-03-28 (Computational Economics)
- NEP-COM-2009-03-28 (Industrial Competition)
- NEP-GTH-2009-03-28 (Game Theory)
- NEP-MIC-2009-03-28 (Microeconomics)
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- Murat YILDIZOGLU (GREQAM, CNRS, UMR 6579) & Marc-Alexandre SENEGAS (GREThA, CNRS, UMR 5113) & Isabelle SALLE (GREThA, CNRS, UMR 5113) & Martin ZUMPE (GREThA, CNRS, UMR 5113), 2011. "Learning the optimal buffer-stock consumption rule of Carroll," Cahiers du GREThA 2011-11, Groupe de Recherche en Economie Théorique et Appliquée.
- Efe Postalci, 2010. "Learning by observing," Working Papers 1007, Izmir University of Economics.
- Isabelle SALLE (GREThA, CNRS, UMR 5113) & Martin ZUMPE (GREThA, CNRS, UMR 5113) & Murat YILDIZOGLU (GREThA, CNRS, UMR 5113) & Marc-Alexandre SENEGAS (GREThA, CNRS, UMR 5113), 2012. "Modelling Social Learning in an Agent-Based New Keynesian Macroeconomic Model," Cahiers du GREThA 2012-20, Groupe de Recherche en Economie Théorique et Appliquée.
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