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The Propagation of Cooperation in a Model of Learning with Endogenous Aspirations

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  • Paolo Lupi

Abstract

In this paper we build a spatial, aspiration-based model of learning in the context of Cournot oligopoly from which we want to explore the conditions that lead to the emergence of cooperation among firms. We consider an economy consisting of many identical duopolies; each duopoly is placed on a square of a torus. The duopolists are boundedly rational agents which adopt a very simple behavioral rule: if they are earning at least average profits, they do not change their strategies; if they are earning below-average profits they imitate the strategy adopted by one of their neighbors. We consider many variations to this simple setup and, in almost all cases, as in Dixon (1998) and Dixon and Lupi (1997) we get results that support cooperation among firms.

Suggested Citation

  • Paolo Lupi, 1998. "The Propagation of Cooperation in a Model of Learning with Endogenous Aspirations," Research in Economics 98-06-052e, Santa Fe Institute.
    • Handle: RePEc:wop:safire:98-06-052e
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    References listed on IDEAS

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    1. Ellison, Glenn, 1993. "Learning, Local Interaction, and Coordination," Econometrica, Econometric Society, vol. 61(5), pages 1047-1071, September.
    2. Huw D. Dixon & Paolo Lupi, "undated". "Learning With a Known Average: a Simulation Study of Alternative Learning Rules," Computing in Economics and Finance 1997 154, Society for Computational Economics.
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    9. Kreps,David M. & Wallis,Kenneth F. (ed.), 1997. "Advances in Economics and Econometrics: Theory and Applications," Cambridge Books, Cambridge University Press, number 9780521589833, October.
    10. 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.
    11. Kreps,David M. & Wallis,Kenneth F. (ed.), 1997. "Advances in Economics and Econometrics: Theory and Applications," Cambridge Books, Cambridge University Press, number 9780521589826, October.
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