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From Walrasian oligopolies to natural monopolyan: An evolutionary model of market structure

  • Ana B. Ania

    (Universidad de Alicante)

  • Carlos Alós Ferrer

    (Universidad de Alicante)

  • Fernando Vega Redondo

    (Instituto Valenciano de Investigaciones Económicas)

We study a market for a homogeneous good in which firms adjust theirproduction decisions on the basis of imitation, learning from own experience, and local experimentation.For any fixed set of firms (more than one), long run behavior settles on a symmetric marginal-cost pricingequlibrium. When market entry and exit are allowed, we find a sharp effect of technology onlongrun market structure. Specifically, we show that, under decreasing returns and some fixed cost,the market grows to full capacity at Walrasian equlibrium; on the other hand, if returns areincreasing, the unique long run outcome involves a profit-maximizing monopolist.

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-1997-24.pdf
File Function: Fisrt version / Primera version, 1997
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Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 1997-24.

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Length: 25 pages
Date of creation: Dec 1997
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:1997-24
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  1. Fernando Vega-Redondo, 1997. "The Evolution of Walrasian Behavior," Econometrica, Econometric Society, vol. 65(2), pages 375-384, March.
  2. Robson, Arthur J. & Vega-Redondo, Fernando, 1996. "Efficient Equilibrium Selection in Evolutionary Games with Random Matching," Journal of Economic Theory, Elsevier, vol. 70(1), pages 65-92, July.
  3. M. Kandori & G. Mailath & R. Rob, 1999. "Learning, Mutation and Long Run Equilibria in Games," Levine's Working Paper Archive 500, David K. Levine.
  4. Rhode, Paul & Stegeman, Mark, 2001. "Non-Nash equilibria of Darwinian dynamics with applications to duopoly," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 415-453, March.
  5. Schaffer, Mark E., 1989. "Are profit-maximisers the best survivors? : A Darwinian model of economic natural selection," Journal of Economic Behavior & Organization, Elsevier, vol. 12(1), pages 29-45, August.
  6. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  7. Novshek, William, 1980. "Cournot Equilibrium with Free Entry," Review of Economic Studies, Wiley Blackwell, vol. 47(3), pages 473-86, April.
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