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Evolution of Conjectures in Cournot Oligopoly

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  • Jacco Thijssen

Abstract

This paper considers a dynamic market where a fixed number of firms engages in Cournot oligopoly. Firms choose the output level based on their assessment of the competitors' reaction to their output choice. This is parameterized using an approach reminiscent of conjectural variations. On a second level firms adapt their conjectural variation by imitating the most successful firm. Simulations suggest that in the long-run the Walrasian, Cournot-Nash and cartel equilibria survive. The theory of nearly-complete decomposability is used to show that the Walrasian equilibrium is approximately the only stochastically stable state.

Suggested Citation

  • Jacco Thijssen, 2003. "Evolution of Conjectures in Cournot Oligopoly," Trinity Economics Papers 200316, Trinity College Dublin, Department of Economics.
    • Handle: RePEc:tcd:tcduee:200316
    as

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    File URL: http://www.tcd.ie/Economics/TEP/2003_papers/tepno16JT23.PDF
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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