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Heterogeneous players in a Cournot model with differentiated products

Author

Listed:
  • Andrea Caravaggio

    (University of Macerata)

  • Mauro Sodini

    (University of Pisa)

Abstract

In this article, we analyse a duopolistic Cournotian game with firms producing differentiated goods, marginal costs are constant and demand functions are microfounded. We consider firms adopting different decisional mechanisms which are based on a reduced degree of rationality. In particular, we assume that a firm adopts the local monopolistic approximation approach, while the rival adjusts its output level according to the gradient rule. We provide conditions for the stability of the Nash equilibrium and investigate some bifurcation scenarios as parameters vary. The main finding of the article is that both a high level and a low level in goods differentiation may have a destabilising role in the system.

Suggested Citation

  • Andrea Caravaggio & Mauro Sodini, 2018. "Heterogeneous players in a Cournot model with differentiated products," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 41(2), pages 277-295, November.
    • Handle: RePEc:spr:decfin:v:41:y:2018:i:2:d:10.1007_s10203-018-0228-x
    DOI: 10.1007/s10203-018-0228-x
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    References listed on IDEAS

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    More about this item

    Keywords

    Bifurcation; Cournot game; Heterogeneous players; Product differentiation;
    All these keywords.

    JEL classification:

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

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