Nearly-complete Decomposability and Stochastic Stability with an Application to Cournot Oligopoly
AbstractThis paper presents a general framework for analysing stochastic stability in models with evolution at two levels. Under certain conditions the theory of nearly-complete decomposability can be used to disentangle these two levels. They can then be studied separately and the equilibrium of one can be used to obtain the equilibrium of the other. This gives an approximation of the equi- librium of the combined dynamics. This approached is applied to a model of conjectural variation and imitation in Cournot oligopoly. If behavioural change takes place infrequently, the Walrasian equilibrium is the unique stochastically stable outcome. As a corollary, it is indicated that smaller industries are more competitive than larger ones.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Trinity College Dublin, Department of Economics in its series Trinity Economics Papers with number tep6.
Date of creation: Aug 2005
Date of revision:
Find related papers by 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
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fernando Vega Redondo, 1996.
"The evolution of walrasian behavior,"
Working Papers. Serie AD
1996-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Alos-Ferrer, Carlos, 2004.
"Cournot versus Walras in dynamic oligopolies with memory,"
International Journal of Industrial Organization,
Elsevier, vol. 22(2), pages 193-217, February.
- Carlos Alós-Ferrer, 2001. "Cournot versus Walras in Dynamic Oligopolies with Memory," Vienna Economics Papers 0110, University of Vienna, Department of Economics.
- Milgrom, Paul & Roberts, John, 1991. "Adaptive and sophisticated learning in normal form games," Games and Economic Behavior, Elsevier, vol. 3(1), pages 82-100, February.
- Burkhard C. Schipper, 2005.
"Imitators and Optimizers in Cournot oligopoly,"
537, University of California, Davis, Department of Economics.
- Burkhard Schipper, 2002. "Imitators and Optimizers in Cournot Oligopoly," Bonn Econ Discussion Papers bgse29_2002, University of Bonn, Germany.
- Schipper, Burkhard C., 2005. "Imitators and Optimizers in Cournot Oligopoly," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 53, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, December.
- Ana B. Ania & Carlos Alós-Ferrer & Klaus R. Schenk-Hoppé, 1998.
"- An Evolutionary Model Of Bertrand Oligopoly,"
Working Papers. Serie AD
1998-14, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Fudenberg, Drew & Levine, David, 1998.
"Learning in games,"
European Economic Review,
Elsevier, vol. 42(3-5), pages 631-639, May.
- Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
- Possajennikov, Alex, 2000. "On the evolutionary stability of altruistic and spiteful preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 42(1), pages 125-129, May.
- Josephson, Jens, 2001.
"Stochastic Adaptation in Finite Games Played by Heterogeneous Populations,"
Working Paper Series in Economics and Finance
475, Stockholm School of Economics.
- Josephson, Jens, 2009. "Stochastic adaptation in finite games played by heterogeneous populations," Journal of Economic Dynamics and Control, Elsevier, vol. 33(8), pages 1543-1554, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Patricia Hughes).
If references are entirely missing, you can add them using this form.