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On A Cournot Duopoly Game With Differentiated Goods, Heterogeneous Expectations And A Cost Function Including Emission Costs

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Listed:
  • Georges SARAFOPOULOS

    () (Department of Economics, Democritus University of Thrace, Greece)

  • Kosmas PAPADOPOULOS

    () (Department of Economics, Democritus University of Thrace, Greece)

Abstract

In this study we investigate the dynamics of a nonlinear Cournot- type duopoly game with differentiated goods, linear demand and a cost function that includes emission costs. The game is modeled with a system of two difference equations. Existence and stability of equilibria of this system are studied. We show that the model gives more complex chaotic and unpredictable trajectories as a consequence of change in the parameter of horizontal product differentiation and a higher (lower) degree of product differentiation (weaker or fiercer competition) destabilize (stabilize) the economy. The chaotic features are justified numerically via computing Lyapunov numbers and sensitive dependence on initial conditions. Also, we show that in this case there are stable trajectories and a higher (lower) degree of product differentiation does not tend to destabilize the economy.

Suggested Citation

  • Georges SARAFOPOULOS & Kosmas PAPADOPOULOS, 2017. "On A Cournot Duopoly Game With Differentiated Goods, Heterogeneous Expectations And A Cost Function Including Emission Costs," Scientific Bulletin - Economic Sciences, University of Pitesti, vol. 16(1), pages 11-22.
  • Handle: RePEc:pts:journl:y:2017:i:1:p:11-22
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    References listed on IDEAS

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    1. Den Haan, Wouter J., 2001. "The importance of the number of different agents in a heterogeneous asset-pricing model," Journal of Economic Dynamics and Control, Elsevier, vol. 25(5), pages 721-746, May.
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    6. Bischi, Gian Italo & Kopel, Michael, 2001. "Equilibrium selection in a nonlinear duopoly game with adaptive expectations," Journal of Economic Behavior & Organization, Elsevier, vol. 46(1), pages 73-100, September.
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    More about this item

    Keywords

    Cournot duopoly game; Discrete dynamical system; Heterogeneous expectations; Stability; Chaotic behavior.;

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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