Convergence in Finite Cournot Oligopoly with Social and Individual Learning
Convergence to Nash equilibrium in Cournot oligopoly is a problem that recurrently arises as a subject of study in economics. The development of evolutionary game theory has provided an equilibrium concept more directly connected with adjustment dynamics and the evolutionary stability of the equilibria of the Cournot game has been studied by several articles. Several articles show that the Walrasian equilibrium is the stable evolutionary solution of the Cournot game. Vriend (2000) proposes to use genetic algorithm for studying learning dynamics in this game and obtains convergence to Cournot equilibrium with individual learning. We show in this article how social learning gives rise to Walras equilibrium and why, in a general setup, individual learning can effectively yield convergence to Cournot instead of Walras equilibrium. We illustrate these general results by computational experiments.
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- Stegeman, Mark & Rhode, Paul, 2004. "Stochastic Darwinian equilibria in small and large populations," Games and Economic Behavior, Elsevier, vol. 49(1), pages 171-214, October.
- Jorgen W. Weibull, 1997. "Evolutionary Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262731215.
- Carlos Alós-Ferrer & Ana Ania, 2005. "The evolutionary stability of perfectly competitive behavior," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(3), pages 497-516, October.
- Vriend, Nicolaas J., 2000. "An illustration of the essential difference between individual and social learning, and its consequences for computational analyses," Journal of Economic Dynamics and Control, Elsevier, vol. 24(1), pages 1-19, January.