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Nonlinear dynamics in a Cournot duopoly with isoelastic demand

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  • Fanti, Luciano
  • Gori, Luca
  • Sodini, Mauro

Abstract

This paper analyses the dynamics of a nonlinear Cournot duopoly with general isoelastic demand (quasi-linear preferences) and quantity-setting firms that have incomplete information about the market demand. Unlike existing papers, we propose a model where the price elasticity of demand is different from one. This causes interesting local and global dynamic events that cannot be observed in the case of unit-elastic demand and homogeneous players. In particular, the global behaviour of the map is studied through the critical curves technique, and numerical simulations show coexistence of attractors, coordination failures and complex structures of the basins of attraction.

Suggested Citation

  • Fanti, Luciano & Gori, Luca & Sodini, Mauro, 2015. "Nonlinear dynamics in a Cournot duopoly with isoelastic demand," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 108(C), pages 129-143.
  • Handle: RePEc:eee:matcom:v:108:y:2015:i:c:p:129-143
    DOI: 10.1016/j.matcom.2013.09.004
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    References listed on IDEAS

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    6. Tramontana, Fabio & Gardini, Laura & Puu, Tönu, 2009. "Cournot duopoly when the competitors operate multiple production plants," Journal of Economic Dynamics and Control, Elsevier, vol. 33(1), pages 250-265, January.
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    1. repec:spr:joevec:v:27:y:2017:i:5:d:10.1007_s00191-017-0503-y is not listed on IDEAS
    2. repec:eee:apmaco:v:336:y:2018:i:c:p:193-205 is not listed on IDEAS
    3. repec:eee:apmaco:v:294:y:2017:i:c:p:253-263 is not listed on IDEAS

    More about this item

    Keywords

    Cournot; Isoelastic demand; Nonlinear dynamics;

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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