An Evolutionary Cournot Oligopoly Model with Imitators and Perfect Foresight Best Responders.

25 Pages Posted: 8 May 2019

See all articles by Lorenzo Cerboni Baiardi

Lorenzo Cerboni Baiardi

University of Urbino

Ahmad Kabir Naimzada

Università degli Studi di Milano-Bicocca - Center for Interdisciplinary Studies in Economics, Psychology & Social Sciences (CISEPS); Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS)

Date Written: May 6, 2019

Abstract

We consider the competition among quantity setting players in a linear evolutionary environment. To set their outputs, players adopt, alternatively, the best response rule having perfect foresight or an imitative rule. Players are allowed to change their behavior through an evolutionary mechanism according to which the rule with better performance will attract more followers. The relevant stationary state of the model describes a scenario where players produce at the Cournot-Nash level. Due to the presence of imitative behavior, we find that the number of players and implementation costs, needed to the best response exploitation, have an ambiguous role in determining the stability properties of the equilibrium and double stability thresholds can be observed. Differently, the role of the intensity of choice, representing the evolutionary propensity to switch to the most profitable rule, has a destabilizing role, in line with the common occurrence in evolutionary models. The global analysis of the model reveals that increasing values of the intensity of choice parameter determine increasing dynamic complexities for the internal attractor representing a population where both decision mechanisms coexist.

Keywords: imitation, heterogeneity, evolutionary game, replicator dynamics, dynamic instability, dynamical systems

Suggested Citation

Cerboni Baiardi, Lorenzo and Naimzada, Ahmad Kabir and Naimzada, Ahmad Kabir, An Evolutionary Cournot Oligopoly Model with Imitators and Perfect Foresight Best Responders. (May 6, 2019). University of Milan Bicocca Department of Economics, Management and Statistics Working Paper No. 407 (2019), Available at SSRN: https://ssrn.com/abstract=3383549 or http://dx.doi.org/10.2139/ssrn.3383549

Lorenzo Cerboni Baiardi

University of Urbino ( email )

Via Saffi 2
Urbino, Pesaro-Urbino 61029
Italy

Ahmad Kabir Naimzada (Contact Author)

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milan, 20126
Italy

Università degli Studi di Milano-Bicocca - Center for Interdisciplinary Studies in Economics, Psychology & Social Sciences (CISEPS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milano, 20126
Italy

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