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Emergent Effective Collusion in an Economy of Perfectly Rational Competitors

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  • Russell K. Standish
  • Steve Keen

Abstract

We consider a simple model of rational agents competing in a single product market described by simple linear demand curve. Contrary to accepted economic theory, the agents' production levels synchronise in the absence of conscious collusion, leading to a downward spiraling of market total production until the monopoly price level is realised. This is in stark contrast to the standard predictions of an ideal rational competitive market. Some form of randomness in the form of agent irrationality, or non-synchronous updates is needed to break this emergent "collusion"

Suggested Citation

  • Russell K. Standish & Steve Keen, 2004. "Emergent Effective Collusion in an Economy of Perfectly Rational Competitors," Papers nlin/0411006, arXiv.org.
    • Handle: RePEc:arx:papers:nlin/0411006
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    References listed on IDEAS

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    1. Julian L. Simon & Carlos M. Puig & John Aschoff, 1973. "A Duopoly Simulation and Richei Theory: An End to Cournot," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 40(3), pages 353-366.
    2. Challet, D. & Zhang, Y.-C., 1997. "Emergence of cooperation and organization in an evolutionary game," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 246(3), pages 407-418.
    3. Keen, Steve, 2004. "Deregulator: Judgment Day for microeconomics," Utilities Policy, Elsevier, vol. 12(3), pages 109-125, September.
    4. G. J. Stigler, 1972. "Perfect Competition, Historically Contemplated," Palgrave Macmillan Books, in: Charles K. Rowley (ed.), Readings in Industrial Economics, chapter 7, pages 105-130, Palgrave Macmillan.
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    Cited by:

    1. Russell K. Standish & Stephen L. Keen, 2015. "Rationality in the Theory of the Firm," World Economic Review, World Economics Association, vol. 2015(5), pages 101-101, July.
    2. David Rosnick, 2015. "Toward an Understanding of Keen and Standish's Theory of the Firm: A Comment," World Economic Review, World Economics Association, vol. 2015(5), pages 107-107, July.

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