Linear Dynamic Cournot Oligopoly Model with Adaptive Expectations
Strategic Management, Vol. 1, pp. 33-36, 2008
6 Pages Posted: 25 Apr 2009 Last revised: 8 Sep 2009
Date Written: March 1, 2008
Abstract
Cournot oligopoly equilibrium is in general dynamically not stable, if on the market act more than two oligopolies (duopolies). In the model it is presumed that oligopolies consider the production of the others to be constant in time. If we extend the model by assumption that oligopolies expect quantities of the others future production, the system is more stable. Such model is more realistic as oligopolies in reality have access to information helping them to better estimate future productions of the others. In the paper we provide an approach, how to deal with a linear Cournot oligopoly dynamic model augmented by adaptive expectations.
Keywords: cournot oligopoly. economic dynamics. adaptive expectations
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