Imitators and Optimizers in a Changing Environment
AbstractWe analyze the dynamic interaction between imitators and optimizers in a changing world. To this end, we put forward a symmetric duopoly game of strategic substitutes where players interact repeatedly in a world of demand- and cost-uncertainty. If the environment changes every period, the process converges globally to a unique two-period cycle where the optimizer has highest payoff every period. As to the general stochastic case, we characterize the long-run average per-period payoff for the optimizer and the imitator respectively as a function of the environmental switching probabilities. It turns out that the imitator experiences selection pressure for a large range of switching probabilities.
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Bibliographic InfoPaper provided by University of Dortmund, Department of Economics in its series Discussion Papers in Economics with number 02_01.
Length: 31 pages
Date of creation: Dec 2004
Date of revision:
Other versions of this item:
- Hehenkamp, Burkhard & Kaarbøe, Oddvar M., 2003. "Imitators and Optimizers in a Changing Environment," Working Papers in Economics 03/03, University of Bergen, Department of Economics.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-06-17 (All new papers)
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