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The Propagation of Cooperation in a Model of Learning with Endogenous Aspirations

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  • Paolo Lupi
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    Abstract

    In this paper we build a spatial, aspiration-based model of learning in the context of Cournot oligopoly from which we want to explore the conditions that lead to the emergence of cooperation among firms. We consider an economy consisting of many identical duopolies; each duopoly is placed on a square of a torus. The duopolists are boundedly rational agents which adopt a very simple behavioral rule: if they are earning at least average profits, they do not change their strategies; if they are earning below-average profits they imitate the strategy adopted by one of their neighbors. We consider many variations to this simple setup and, in almost all cases, as in Dixon (1998) and Dixon and Lupi (1997) we get results that support cooperation among firms.

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    Bibliographic Info

    Paper provided by Santa Fe Institute in its series Research in Economics with number 98-06-052e.

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    Date of creation: Jun 1998
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    Handle: RePEc:wop:safire:98-06-052e

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    1. D. Canning, 2010. "Average Behavior in Learning Models," Levine's Working Paper Archive 490, David K. Levine.
    2. Huw D. Dixon & Paolo Lupi, . "Learning with a Known Average: A Simulation Study of Alternative Learning Rules," Discussion Papers, Department of Economics, University of York 97/18, Department of Economics, University of York.
    3. Aderlini, L. & Ianni, A., 1993. "Path Dependence and Learning from Neighbours," Papers, Cambridge - Risk, Information & Quantity Signals 186, Cambridge - Risk, Information & Quantity Signals.
    4. Ellison, Glenn, 1993. "Learning, Local Interaction, and Coordination," Econometrica, Econometric Society, Econometric Society, vol. 61(5), pages 1047-71, September.
    5. Ramon Marimon & Ellen McGrattan, 1993. "On adaptive learning in strategic games," Economics Working Papers 24, Department of Economics and Business, Universitat Pompeu Fabra.
    6. Blume Lawrence E., 1993. "The Statistical Mechanics of Strategic Interaction," Games and Economic Behavior, Elsevier, Elsevier, vol. 5(3), pages 387-424, July.
    7. Dixon, Huw David, 1998. "Keeping Up With the Joneses: Competition and the Evolution of Collusion in an Oligopolistic Economy," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1810, C.E.P.R. Discussion Papers.
    8. Nicolas Jonard & Murat Yildizoglu, . "Technological Diversity in an Evolutionary Industry Model with Localized Learning and Network Externalities," Computing in Economics and Finance 1997, Society for Computational Economics 13, Society for Computational Economics.
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