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A Continuous Approach to Oligopolistic Market Equilibrium

Author

Listed:
  • Sjur D. Flåm

    (University of Bergen, Bergen, Norway)

  • Adi Ben-Israel

    (Rutgers University, New Brunswick, New Jersey)

Abstract

We provide an algorithm for computing Cournot-Nash equilibria in a market that involves finitely many producers. The algorithm amounts to following a certain dynamical system all the way to its steady state, which happens to be a noncooperative equilibrium. The dynamics arise quite naturally as follows. Let each producer continuously adjust the planned production, if desired, as a response to the current aggregate supply. In doing so, the producer is completely guided by myopic profit considerations. We show, under broad hypothesis, that this adjustment process is globally, asymptotically convergent to a Nash equilibrium.

Suggested Citation

  • Sjur D. Flåm & Adi Ben-Israel, 1990. "A Continuous Approach to Oligopolistic Market Equilibrium," Operations Research, INFORMS, vol. 38(6), pages 1045-1051, December.
    • Handle: RePEc:inm:oropre:v:38:y:1990:i:6:p:1045-1051
    DOI: 10.1287/opre.38.6.1045
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    Citations

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    Cited by:

    1. Pompermayer F.M. & Florian M. & Leal J.E., 2002. "A spatial price oligopoly model for refined petroleum products: an application to a Brazilian case," Computing in Economics and Finance 2002 172, Society for Computational Economics.
    2. Anna Nagurney & Dong Li, 2014. "A Dynamic Network Oligopoly Model with Transportation Costs, Product Differentiation, and Quality Competition," Computational Economics, Springer;Society for Computational Economics, vol. 44(2), pages 201-229, August.
    3. Anna Nagurney, 2010. "Formulation and analysis of horizontal mergers among oligopolistic firms with insights into the merger paradox: a supply chain network perspective," Computational Management Science, Springer, vol. 7(4), pages 377-406, October.
    4. Giancarlo Bigi & Mauro Passacantando, 2017. "Differentiated oligopolistic markets with concave cost functions via Ky Fan inequalities," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 40(1), pages 63-79, November.
    5. Y. S. Xia & J. Wang, 2000. "On the Stability of Globally Projected Dynamical Systems," Journal of Optimization Theory and Applications, Springer, vol. 106(1), pages 129-150, July.
    6. Flam, Sjur Didrik, 1996. "Approaches to economic equilibrium," Journal of Economic Dynamics and Control, Elsevier, vol. 20(9-10), pages 1505-1522.

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