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From Walrasian oligopolies to natural monopolyan: An evolutionary model of market structure

Author

Listed:
  • Ana B. Ania

    (Universidad de Alicante)

  • Carlos Alós Ferrer

    (Universidad de Alicante)

  • Fernando Vega Redondo

    (Instituto Valenciano de Investigaciones Económicas)

Abstract

We study a market for a homogeneous good in which firms adjust theirproduction decisions on the basis of imitation, learning from own experience, and local experimentation.For any fixed set of firms (more than one), long run behavior settles on a symmetric marginal-cost pricingequlibrium. When market entry and exit are allowed, we find a sharp effect of technology onlongrun market structure. Specifically, we show that, under decreasing returns and some fixed cost,the market grows to full capacity at Walrasian equlibrium; on the other hand, if returns areincreasing, the unique long run outcome involves a profit-maximizing monopolist.

Suggested Citation

  • Ana B. Ania & Carlos Alós Ferrer & Fernando Vega Redondo, 1997. "From Walrasian oligopolies to natural monopolyan: An evolutionary model of market structure," Working Papers. Serie AD 1997-24, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  • Handle: RePEc:ivi:wpasad:1997-24
    as

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-1997-24.pdf
    File Function: Fisrt version / Primera version, 1997
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    References listed on IDEAS

    as
    1. Robson, Arthur J. & Vega-Redondo, Fernando, 1996. "Efficient Equilibrium Selection in Evolutionary Games with Random Matching," Journal of Economic Theory, Elsevier, vol. 70(1), pages 65-92, July.
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    5. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
    6. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January.
    7. Fernando Vega-Redondo, 1997. "The Evolution of Walrasian Behavior," Econometrica, Econometric Society, vol. 65(2), pages 375-384, March.
    8. William Novshek, 1980. "Cournot Equilibrium with Free Entry," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(3), pages 473-486.
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    Cited by:

    1. Alos-Ferrer, Carlos & Ania, Ana B. & Schenk-Hoppe, Klaus Reiner, 2000. "An Evolutionary Model of Bertrand Oligopoly," Games and Economic Behavior, Elsevier, vol. 33(1), pages 1-19, October.
    2. Andreas Papatheodorou, 2003. "Modelling Tourism Development: A Synthetic Approach," Tourism Economics, , vol. 9(4), pages 407-430, December.

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    Keywords

    Imitation; evolution; mutation;
    All these keywords.

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