IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Imitation by price and quantity setting firms in a differentiated market

Listed author(s):
  • Khan, A.

    (General Economics 0 (Onderwijs))

  • Peeters, R.J.A.P.

    (General Economics 1 (Micro))

We study the evolution of imitation behaviour in a differentiated market where firms are located equidistantly on a (Salop) circle. Firms choose price and quantity simultaneously, leaving open the possibility for non-market clearing outcomes. The strategy of the most successful firm is imitated. Behaviour in the stochastically stable outcome depends on the level of market differentiation and corresponds exactly with the Nash equilibrium of the underlying game. For high level of differentiation, firms end up at the monopoly outcome. For intermediate level of differentiation, they gravitate to a ``mutually non-aggressive'' outcome where price is higher than the monopoly price. For low level of differentiation, firms price at a mark-up above the marginal cost. Market clearing always results endogenously.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://cris.maastrichtuniversity.nl/portal/files/680279/content
Download Restriction: no

Paper provided by Maastricht University, Graduate School of Business and Economics (GSBE) in its series Research Memorandum with number 022.

as
in new window

Length:
Date of creation: 01 Jan 2013
Handle: RePEc:unm:umagsb:2013022
Contact details of provider: Postal:
P.O. Box 616, 6200 MD Maastricht

Phone: +31 (0)43 38 83 830
Web page: http://www.maastrichtuniversity.nl/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Apesteguia, Jose & Huck, Steffen & Oechssler, Jorg, 2007. "Imitation--theory and experimental evidence," Journal of Economic Theory, Elsevier, vol. 136(1), pages 217-235, September.
  2. Theo Offerman & Jan Potters & Joep Sonnemans, 2002. "Imitation and Belief Learning in an Oligopoly Experiment," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 973-997.
  3. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 2000. "Does information about competitors' actions increase or decrease competition in experimental oligopoly markets?," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 39-57, January.
  4. Carl Davidson & Raymond Deneckere, 1986. "Long-Run Competition in Capacity, Short-Run Competition in Price, and the Cournot Model," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 404-415, Autumn.
  5. Josephson, Jens, 2009. "Stochastic adaptation in finite games played by heterogeneous populations," Journal of Economic Dynamics and Control, Elsevier, vol. 33(8), pages 1543-1554, August.
  6. Khan Abhimanyu & Peeters Ronald, 2011. "Evolution of behavior when duopolists choose prices and quantities," Research Memorandum 027, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  7. Alos-Ferrer, Carlos & Ania, Ana B. & Schenk-Hoppe, Klaus Reiner, 2000. "An Evolutionary Model of Bertrand Oligopoly," Games and Economic Behavior, Elsevier, vol. 33(1), pages 1-19, October.
  8. Armen A. Alchian, 1950. "Uncertainty, Evolution, and Economic Theory," Journal of Political Economy, University of Chicago Press, vol. 58, pages 211-211.
  9. Schipper, Burkhard C., 2009. "Imitators and optimizers in Cournot oligopoly," Journal of Economic Dynamics and Control, Elsevier, vol. 33(12), pages 1981-1990, December.
  10. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  11. Levitan, Richard & Shubik, Martin, 1972. "Price Duopoly and Capacity Constraints," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(1), pages 111-122, February.
  12. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 1999. "Learning in Cournot Oligopoly--An Experiment," Economic Journal, Royal Economic Society, vol. 109(454), pages 80-95, March.
  13. Hehenkamp, Burkhard & Wambach, Achim, 2010. "Survival at the center--The stability of minimum differentiation," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 853-858, December.
  14. Hehenkamp, Burkhard & Kaarbøe, Oddvar M., 2003. "Imitators and Optimizers in a Changing Environment," Working Papers in Economics 03/03, University of Bergen, Department of Economics.
  15. Yasuhito Tanaka, 1999. "Long run equilibria in an asymmetric oligopoly," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 14(3), pages 705-715.
  16. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January.
  17. Alós-Ferrer, Carlos & Weidenholzer, Simon, 2014. "Imitation and the role of information in overcoming coordination failures," Games and Economic Behavior, Elsevier, vol. 87(C), pages 397-411.
  18. Fernando Vega-Redondo, 1997. "The Evolution of Walrasian Behavior," Econometrica, Econometric Society, vol. 65(2), pages 375-384, March.
  19. Carlos Alós-Ferrer & Georg Kirchsteiger, 2010. "General equilibrium and the emergence of (non)market clearing trading institutions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 44(3), pages 339-360, September.
  20. Mark A. Satterthwaite, 1979. "Consumer Information, Equilibrium Industry Price, and the Number of Sellers," Bell Journal of Economics, The RAND Corporation, vol. 10(2), pages 483-502, Autumn.
  21. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
  22. Tanaka, Yasuhito, 2001. "Evolution to equilibrium in an asymmetric oligopoly with differentiated goods," International Journal of Industrial Organization, Elsevier, vol. 19(9), pages 1423-1440, November.
  23. Rosenthal, Robert W, 1980. "A Model in Which an Increase in the Number of Sellers Leads to a Higher Price," Econometrica, Econometric Society, vol. 48(6), pages 1575-1579, September.
  24. P. Jean-Jacques Herings, 1997. "Endogenously determined price rigidities (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 9(3), pages 471-498.
  25. Selten, Reinhard & Apesteguia, Jose, 2005. "Experimentally observed imitation and cooperation in price competition on the circle," Games and Economic Behavior, Elsevier, vol. 51(1), pages 171-192, April.
  26. Yongmin Chen & Michael H. Riordan, 2008. "Price-increasing competition," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 1042-1058.
  27. Boncinelli Leonardo, 2008. "Global vs. Local Information in (Anti-)Coordination Problems with Imitators," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 8(1), pages 1-19, June.
  28. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:unm:umagsb:2013022. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Leonne Portz)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.