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Stability analysis in a Cournot duopoly with managerial sales delegation and bounded rationality

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  • Fanti, Luciano
  • Gori, Luca

Abstract

The present study analyses the dynamics of a Cournot duopoly with managerial sales delegation and bounded rational players. We find that when firms’ owners hire a manager and delegate the output decisions to him, the unique Cournot-Nash equilibrium is more likely to be destabilised (through a flip bifurcation) than when firms maximise profits. Moreover, highly periodicity and deterministic chaos can also occur as the managers’ bonus increases.

Suggested Citation

  • Fanti, Luciano & Gori, Luca, 2011. "Stability analysis in a Cournot duopoly with managerial sales delegation and bounded rationality," MPRA Paper 33828, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:33828
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    More about this item

    Keywords

    Bifurcation; Chaos; Cournot; Duopoly; Managerial incentive contracts;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium

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