Oligopoly with Hyperbolic Demand: A Differential Game Approach
It is well known that the equilibrium solution of oligopoly games with isoelastic demand functions can be indeterminate. I revisit this issue through an open-loop differential game approach based on the assumption of sticky prices, to show that indeterminacy arises only in steady state, in the limit case where marginal costs tend to zero. Otherwise, at any time during the game, Pontryagin’s Maximum Principle ensures the existence of a unique and well defined solution, irrespective of the size of marginal costs. Finally, I show that an analogous result holds in the feedback case, although the Bellman equation of the representative firm cannot be solved analytically.
|Date of creation:||Jun 2007|
|Contact details of provider:|| Postal: Piazza Scaravilli, 2, and Strada Maggiore, 45, 40125 Bologna|
Phone: +39 051 209 8019 and 2600
Fax: +39 051 209 8040 and 2664
Web page: http://www.dse.unibo.it
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- McKelvey, Richard D. & Patty, John W., 2006. "A theory of voting in large elections," Games and Economic Behavior, Elsevier, vol. 57(1), pages 155-180, October.
- Ansolabehere, Stephen & Snyder, James M, Jr, 2000. "Valence Politics and Equilibrium in Spatial Election Models," Public Choice, Springer, vol. 103(3-4), pages 327-336, June.
- Steffen Huck & Vicki Knoblauch & Wieland MÃ¼ller, 2006.
"Spatial Voting with Endogenous Timing,"
Journal of Institutional and Theoretical Economics (JITE),
Mohr Siebeck, Tübingen, vol. 162(4), pages 557-570, December.
- Huck, S. & Müller, W. & Knoblauch, V., 2004. "Spatial Voting with Endogenous Timing," Discussion Paper 2004-10, Tilburg University, Center for Economic Research.
- Huck, S. & Knoblauch, V. & Müller, W., 2006. "Spatial voting with endogenous timing," Other publications TiSEM 8838210a-a44f-44e6-b42d-9, Tilburg University, School of Economics and Management.
- Adams, James, 2000. "Multicandidate Equilibrium in American Elections," Public Choice, Springer, vol. 103(3-4), pages 297-325, June.
- Patty, John Wiggs, 2005. "Local equilibrium equivalence in probabilistic voting models," Games and Economic Behavior, Elsevier, vol. 51(2), pages 523-536, May.
- Lambertini, Luca, 1997. "Optimal Fiscal Regime in a Spatial Duopoly," Journal of Urban Economics, Elsevier, vol. 41(3), pages 407-420, May.
- L. Lambertini, 1994. "Optimal Fiscal Regime in a Spatial Duopoly," Working Papers 205, Dipartimento Scienze Economiche, Universita' di Bologna.
- Kollman, Ken & Miller, John H. & Page, Scott E., 1997. "Landscape formation in a spatial voting model," Economics Letters, Elsevier, vol. 55(1), pages 121-130, August.
- Adams, James, 1999. "Policy Divergence in Multicandidate Probabilistic Spatial Voting," Public Choice, Springer, vol. 100(1-2), pages 103-122, July.
- Norman Schofield, 2006. "Equilibria in the spatial stochastic model of voting with party activists," Review of Economic Design, Springer;Society for Economic Design, vol. 10(3), pages 183-203, December. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:bol:bodewp:597. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dipartimento Scienze Economiche, Universita' di Bologna)
If references are entirely missing, you can add them using this form.