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The Propagation of Cooperation in a Model of Learning with Endogenous Aspirations

  • Paolo Lupi
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    In this paper we build a spatial, aspiration-based model of learning in the context of Cournot oligopoly from which we want to explore the conditions that lead to the emergence of cooperation among firms. We consider an economy consisting of many identical duopolies; each duopoly is placed on a square of a torus. The duopolists are boundedly rational agents which adopt a very simple behavioral rule: if they are earning at least average profits, they do not change their strategies; if they are earning below-average profits they imitate the strategy adopted by one of their neighbors. We consider many variations to this simple setup and, in almost all cases, as in Dixon (1998) and Dixon and Lupi (1997) we get results that support cooperation among firms.

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    Paper provided by Santa Fe Institute in its series Research in Economics with number 98-06-052e.

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    Date of creation: Jun 1998
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    Handle: RePEc:wop:safire:98-06-052e
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    1. Canning, D., 1990. "Average Behaviour In Learning Models," Papers 156, Cambridge - Risk, Information & Quantity Signals.
    2. Ramon Marimon & Ellen McGrattan, 1993. "On adaptive learning in strategic games," Economics Working Papers 24, Department of Economics and Business, Universitat Pompeu Fabra.
    3. Huw D. Dixon & Paolo Lupi, . "Learning with a Known Average: A Simulation Study of Alternative Learning Rules," Discussion Papers 97/18, Department of Economics, University of York.
    4. L. Blume, 2010. "The Statistical Mechanics of Strategic Interaction," Levine's Working Paper Archive 488, David K. Levine.
    5. Jonard, N. & Yfldizoglu, M., 1998. "Technological diversity in an evolutionary industry model with localized learning and network externalities," Structural Change and Economic Dynamics, Elsevier, vol. 9(1), pages 35-53, March.
    6. Glen Ellison, 2010. "Learning, Local Interaction, and Coordination," Levine's Working Paper Archive 391, David K. Levine.
    7. Anderlini, Luca & Ianni, Antonella, 1996. "Path Dependence and Learning from Neighbors," Games and Economic Behavior, Elsevier, vol. 13(2), pages 141-177, April.
    8. Dixon, Huw David, 1998. "Keeping Up With the Joneses: Competition and the Evolution of Collusion in an Oligopolistic Economy," CEPR Discussion Papers 1810, C.E.P.R. Discussion Papers.
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