IDEAS home Printed from https://ideas.repec.org/p/ivi/wpasad/1998-14.html
   My bibliography  Save this paper

- An Evolutionary Model Of Bertrand Oligopoly

Author

Listed:
  • Ana B. Ania

    (Universidad de Alicante)

  • Carlos Alós-Ferrer

    (Universidad de Alicante)

  • Klaus R. Schenk-Hoppé

    (University of Bielefeld)

Abstract

We analyze the long-run outcome of markets in which boundedly rational firms with a decreasingreturns to scale technology compete in prices. The behavior of these firms is based on limitation ofsuccess and experimentation. In this framework, we introduce a new approach to model boundedlyrational behavior, based on the idea of behavioral principles, i.e. formal descriptions. Even with thesimplest ones, the result is that the prices announced are a strict refinement of the set of Nashequilibria. With more sophisticated behavioral principles, the long-run outcome corresponds to theconcept of central prices (wich are also Nash equilibria) introduced here. This is a robust andclear-cut prediction wich, under quadratic costs and arbitrary demand, essentially coincides with theWalrasian equilibrium.

Suggested Citation

  • Ana B. Ania & Carlos Alós-Ferrer & Klaus R. Schenk-Hoppé, 1998. "- An Evolutionary Model Of Bertrand Oligopoly," Working Papers. Serie AD 1998-14, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:1998-14
    as

    Download full text from publisher

    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-1998-14.pdf
    File Function: Fisrt version / Primera version, 1998
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 2000. "Does information about competitors' actions increase or decrease competition in experimental oligopoly markets?," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 39-57, January.
    2. Dastidar, Krishnendu Ghosh, 1995. "On the Existence of Pure Strategy Bertrand Equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 5(1), pages 19-32, January.
    3. Dastidar, Krishnendu Ghosh, 1997. "Comparing Cournot and Bertrand in a Homogeneous Product Market," Journal of Economic Theory, Elsevier, vol. 75(1), pages 205-212, July.
    4. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
    5. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 1999. "Learning in Cournot Oligopoly--An Experiment," Economic Journal, Royal Economic Society, vol. 109(454), pages 80-95, March.
    6. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January.
    7. Fernando Vega-Redondo, 1997. "The Evolution of Walrasian Behavior," Econometrica, Econometric Society, vol. 65(2), pages 375-384, March.
    8. Schlag, Karl H., 1998. "Why Imitate, and If So, How?, : A Boundedly Rational Approach to Multi-armed Bandits," Journal of Economic Theory, Elsevier, vol. 78(1), pages 130-156, January.
    9. Shapiro, Carl, 1989. "Theories of oligopoly behavior," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 6, pages 329-414, Elsevier.
    10. Ana B. Ania & Carlos Alós Ferrer & Fernando Vega Redondo, 1997. "From Walrasian oligopolies to natural monopolyan: An evolutionary model of market structure," Working Papers. Serie AD 1997-24, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    11. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 2, number 2.
    12. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 1, number 1.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:awi:wpaper:0461 is not listed on IDEAS
    2. Apesteguia, Jose & Huck, Steffen & Oechssler, Jorg, 2007. "Imitation--theory and experimental evidence," Journal of Economic Theory, Elsevier, vol. 136(1), pages 217-235, September.
    3. Apesteguia, Jose & Huck, Steffen & Oechssler, Jörg & Weidenholzer, Simon, 2010. "Imitation and the evolution of Walrasian behavior: Theoretically fragile but behaviorally robust," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1603-1617, September.
    4. Schipper, Burkhard C., 2009. "Imitators and optimizers in Cournot oligopoly," Journal of Economic Dynamics and Control, Elsevier, vol. 33(12), pages 1981-1990, December.
    5. Abbink, Klaus & Brandts, Jordi, 2008. "24. Pricing in Bertrand competition with increasing marginal costs," Games and Economic Behavior, Elsevier, vol. 63(1), pages 1-31, May.
    6. Jonas Hedlund, 2015. "Imitation in Cournot oligopolies with multiple markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 60(3), pages 567-587, November.
    7. Khan, Abhimanyu & Peeters, Ronald, 2015. "Imitation by price and quantity setting firms in a differentiated market," Journal of Economic Dynamics and Control, Elsevier, vol. 53(C), pages 28-36.
    8. repec:awi:wpaper:0419 is not listed on IDEAS
    9. Jonathan Newton, 2018. "Evolutionary Game Theory: A Renaissance," Games, MDPI, vol. 9(2), pages 1-67, May.
    10. Hehenkamp, Burkhard & Wambach, Achim, 2010. "Survival at the center--The stability of minimum differentiation," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 853-858, December.
    11. Fernando Vega-Redondo, 1999. "Markets under bounded rationality: from theory to facts," Investigaciones Economicas, Fundación SEPI, vol. 23(1), pages 3-26, January.
    12. Bigoni, Maria, 2010. "What do you want to know? Information acquisition and learning in experimental Cournot games," Research in Economics, Elsevier, vol. 64(1), pages 1-17, March.
    13. Josephson, Jens & Matros, Alexander, 2004. "Stochastic imitation in finite games," Games and Economic Behavior, Elsevier, vol. 49(2), pages 244-259, November.
    14. Abhimanyu Khan & Ronald Peeters, 2020. "Evolution of Behavior When Duopolists Choose Prices and Quantities," Dynamic Games and Applications, Springer, vol. 10(2), pages 493-508, June.
    15. Ania, Ana B. & Troger, Thomas & Wambach, Achim, 2002. "An evolutionary analysis of insurance markets with adverse selection," Games and Economic Behavior, Elsevier, vol. 40(2), pages 153-184, August.
    16. Klaus Abbink & Jordi Brandts, 2002. "24," UFAE and IAE Working Papers 523.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
      • Jordi Brandts & Klaus Abbink, 2004. "24," Levine's Bibliography 122247000000000073, UCLA Department of Economics.
    17. Yasuhiro Shirata, 2020. "Evolution of a Collusive Price in a Networked Market," Dynamic Games and Applications, Springer, vol. 10(2), pages 528-554, June.
    18. Alós-Ferrer, Carlos & Weidenholzer, Simon, 2014. "Imitation and the role of information in overcoming coordination failures," Games and Economic Behavior, Elsevier, vol. 87(C), pages 397-411.
    19. Huang, Weihong, 2011. "Price-taking behavior versus continuous dynamic optimizing," Journal of Economic Behavior & Organization, Elsevier, vol. 78(1), pages 37-50.
    20. Leonardo Boncinelli, 2007. "Global vs. Local Information," Department of Economics University of Siena 520, Department of Economics, University of Siena.
    21. Carlos Alós-Ferrer & Johannes Buckenmaier & Georg Kirchsteiger, 2022. "Do traders learn to select efficient market institutions?," Experimental Economics, Springer;Economic Science Association, vol. 25(1), pages 203-228, February.
    22. Cartwright, Edward, 2003. "Imitation and the Emergence of Nash Equilibrium Play in Games with Many Players," The Warwick Economics Research Paper Series (TWERPS) 684, University of Warwick, Department of Economics.

    More about this item

    Keywords

    evolution; mutation; imitation;
    All these keywords.

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ivi:wpasad:1998-14. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Departamento de Edición (email available below). General contact details of provider: https://edirc.repec.org/data/ievages.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.