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Imitators and Optimizers in Cournot oligopoly

Author

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  • Burkhard C. Schipper

    (Department of Economics, University of California Davis)

Abstract

We analyze a symmetric n-firm Cournot oligopoly with a heterogeneous population of optimizers and imitators. Imitators mimic the output decision of the most successful firms of the previous round a la Vega-Redondo (1997). Optimizers play a myopic best response to the opponents' previous output. Firms are allowed to make mistakes and deviate from their decision rules with a small probability. Applying stochastic stability analysis, we find that the long run distribution converges to a recurrent set of states in which imitators are better off than are optimizers. This finding appears to be robust even when optimizers are more sophisticated. It suggests that imitators drive optimizers out of the market contradicting a fundamental conjecture by Friedman (1953).

Suggested Citation

  • Burkhard C. Schipper, 2005. "Imitators and Optimizers in Cournot oligopoly," Working Papers 67, University of California, Davis, Department of Economics.
  • Handle: RePEc:cda:wpaper:67
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    File URL: http://repec.dss.ucdavis.edu/files/kG51nPmKvSJ8NaceYhVSXSYi/05-37.pdf
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    References listed on IDEAS

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    Cited by:

    1. Schipper, Burkhard C., 2005. "The Evolutionary Stability of Optimism, Pessimism and Complete Ignorance," Bonn Econ Discussion Papers 35/2005, University of Bonn, Bonn Graduate School of Economics (BGSE).

    More about this item

    Keywords

    profit maximization hypothesis; bounded rationality; learning; Stackelberg;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • 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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