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Analysis on the dynamics of a Cournot investment game with bounded rationality

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  • Ding, Zhanwen
  • Wang, Qiao
  • Jiang, Shumin

Abstract

In this work, a dynamic system of investment game played by two firms with bounded rationality is proposed. It is assumed that each firm in any period makes a strategy for investment and uses local knowledge to make investment strategy according to the marginal profit observed in the previous period. Theoretic work is done on the existence of equilibrium solutions, the instability of the boundary equilibriums and the stability conditions of the interior equilibrium. Numerical simulations are used to provide experimented evidence for the complicated behaviors of the system evolution. It is observed that the equilibrium of the system can loose stability via flip bifurcation or Neimark–Sacher bifurcation and time-delayed feedback control can be used to stabilize the chaotic behaviors of the system.

Suggested Citation

  • Ding, Zhanwen & Wang, Qiao & Jiang, Shumin, 2014. "Analysis on the dynamics of a Cournot investment game with bounded rationality," Economic Modelling, Elsevier, vol. 39(C), pages 204-212.
    • Handle: RePEc:eee:ecmode:v:39:y:2014:i:c:p:204-212
    DOI: 10.1016/j.econmod.2014.02.030
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    Cited by:

    1. Shi, Lian & Sheng, Zhaohan & Xu, Feng, 2015. "The dynamics of competition in remanufacturing: A stability analysis," Economic Modelling, Elsevier, vol. 50(C), pages 245-253.
    2. Zhengyang Liu & Haolin Lu & Liang Shan & Zihe Wang, 2024. "On the Oscillations in Cournot Games with Best Response Strategies," Papers 2410.09435, arXiv.org.
    3. Ding, Zhanwen & Li, Qiang & Jiang, Shumin & Wang, Xuedi, 2015. "Dynamics in a Cournot investment game with heterogeneous players," Applied Mathematics and Computation, Elsevier, vol. 256(C), pages 939-950.
    4. Fabio Lamantia & Anghel Negriu & Jan Tuinstra, 2018. "Technology choice in an evolutionary oligopoly game," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 41(2), pages 335-356, November.
    5. Liang, Hanchao & Yang, Chunpeng & Cai, Chuangqun, 2017. "Beauty contest, bounded rationality, and sentiment pricing dynamics," Economic Modelling, Elsevier, vol. 60(C), pages 71-80.
    6. Lamantia, F. & Negriu, A. & Tuinstra, J., 2016. "Evolutionary Cournot competition with endogenous technology choice: (in)stability and optimal policy," CeNDEF Working Papers 16-08, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.

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