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Keeping Up With the Joneses: Competition and the Evolution of Collusion in an Oligopolistic Economy

Author

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  • Dixon, Huw David

Abstract

An economy consists of many duopolistic markets. Firms must earn normal profits in the long run if they are to survive. Normal profits are interpreted as the long-run limit of average profits in the whole economy. We adopt the aspiration based model of firm behaviour, and link it to the economy with the requirement that in the long run the profit aspiration must be at least as great as normal profits. We assume that the joint profits can be maximized with symmetric payoffs, and with very few other assumptions are able to show that the (almost) global attractor is the cooperative outcome.

Suggested Citation

  • 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.
    • Handle: RePEc:cpr:ceprdp:1810
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    Cited by:

    1. Paolo Lupi, 1998. "The Propagation of Cooperation in a Model of Learning with Endogenous Aspirations," Research in Economics 98-06-052e, Santa Fe Institute.

    More about this item

    Keywords

    aspirations; Average; Evolution; Learning;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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