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A Note On Stability Of Best Reply And Gradient Systems With Applications To Imperfectly Competitive Models

Author

Listed:
  • Luis Corchón

    () (Universidad de Alicante)

  • Andreu Mas-Colell

    (Harvard University)

Abstract

In this paper we present a general result on the convergence to an equilibrium of a class of dynamic adjustment procedures -which includes Gradient Systems and Best Reply Dynamics as special cases- when there are two players and strategy sets are one dimensional. We also show that there are no restrictions on the form of Gradient or Best Reply dynamics, even under strong restrictions on the functional form of both demand and costs. This implies that we can construct examples with three players where the above dynamical procedures yield chaotic behavior.

Suggested Citation

  • Luis Corchón & Andreu Mas-Colell, 1995. "A Note On Stability Of Best Reply And Gradient Systems With Applications To Imperfectly Competitive Models," Working Papers. Serie AD 1995-18, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  • Handle: RePEc:ivi:wpasad:1995-18
    as

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-1995-18.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Hommes, C.H. & Ochea, M. & Tuinstra, J., 2011. "On the stability of the Cournot equilibrium: An evolutionary approach," CeNDEF Working Papers 11-10, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.

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