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Cournot oligopoly: a discrete time sticky-prices paradox

Author

Listed:
  • Pierre Bernhard

    (MACBES Team, INRIA, Université de Côte d'Azur, France)

  • Marc Deschamps

    (Université de Franche-Comté, CRESE, UR3190, F-25000 Besançon, France)

Abstract

This article studies the issue of sticky prices in the context of a dynamic Cournot oligopoly model in discrete time with n asymmetric firms, and with costs and demand linear. We recover the somewhat surprising fact of the related continuous time literature that the asymptotic price is lower than the price of the repeated game. But contrary to the continuous time case, in discrete time we find 1/ that the limit at vanishing viscosity coincides with the non-sticky case, and, more surprisingly 2/ that the equilibrium price trajectory oscillates around the asymptotic price.

Suggested Citation

  • Pierre Bernhard & Marc Deschamps, 2024. "Cournot oligopoly: a discrete time sticky-prices paradox," Working Papers 2024-01, CRESE.
  • Handle: RePEc:crb:wpaper:2024-01
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    Keywords

    Sticky price; Cournot oligopoly; Dynamic Game; Discrete time;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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