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Heterogeneous Behavioral Rules in the Oligopolistic Case

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Abstract

In a static symmetric duopoly the set of behavioral rules is extended to different types of markup pricing. Using an equilibrium concept suggested in Pasche (2001), it is shown that dependend on the markup neither pure Cournot nor pure Bertrand behavior is a behavioral equilibrium profile. Instead, there is a rationale for the usage of simple heuristics. The presence of markup rules leads to Stackelberg outcomes. Furthermore, pure markup behavior is more competitive than in Cournot case but less competitive than in Bertrand case. It is shown, that multiple behavioral equilibria and heterogeneous behavior may arise, where at least one player uses price setting strategies.

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File URL: http://www.wiwi.uni-jena.de/Papers/wp-b0201.pdf
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Paper provided by Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultïät in its series Working Paper Series B with number 2002-01.

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Date of creation: 10 Feb 2002
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Handle: RePEc:jen:jenavo:2002-01

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Keywords: oligopoly; markup rules; heterogeneity; behavioral equilibrium.;

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  1. Markus Pasche, 2001. "Equilibrium Concepts for Boundedly Rational Behavior in Games," Working Paper Series B, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultïät 2001-03, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultïät.
  2. Grant, Simon & Quiggin, John, 1994. "Nash equilibrium with mark-up-pricing oligopolists," Economics Letters, Elsevier, vol. 45(2), pages 245-251, June.
  3. Vives, Xavier, 1985. "On the efficiency of Bertrand and Cournot equilibria with product differentation," Journal of Economic Theory, Elsevier, vol. 36(1), pages 166-175, June.
  4. Güth, Werner & Kliemt, Hartmut, 2001. "From full to bounded rationality: The limits of unlimited rationality," SFB 373 Discussion Papers 2001,12, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  5. Dixit, Avinash K, 1986. "Comparative Statics for Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 107-22, February.
  6. Leonard Cheng, 1985. "Comparing Bertrand and Cournot Equilibria: A Geometric Approach," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 146-152, Spring.
  7. Lipman, Barton L, 1991. "How to Decide How to Decide How to. . . : Modeling Limited Rationality," Econometrica, Econometric Society, Econometric Society, vol. 59(4), pages 1105-25, July.
  8. Rhode, Paul & Stegeman, Mark, 2001. "Non-Nash equilibria of Darwinian dynamics with applications to duopoly," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 19(3-4), pages 415-453, March.
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Cited by:
  1. Markus Pasche, 2001. "Equilibrium Concepts for Boundedly Rational Behavior in Games," Working Paper Series B, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultïät 2001-03, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultïät.

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