An evolutionary Cournot oligopoly model with imitators and perfect foresight best responders

We consider the competition among quantity setting players in a linear evolutionary environment. To set their outputs, players adopt, alternatively, the best response rule having perfect foresight or an imitative rule. Players are allowed to change their behavior through an evolutionary mechanism ac...

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Bibliographic Details
Published in:Metroeconomica 2019-07, Vol.70 (3), p.458-475
Main Authors: Cerboni Baiardi, Lorenzo, Naimzada, Ahmad K.
Format: Article
Language:English
Subjects:
Ambiguity
Behavior change
dynamic instability
dynamical systems
Economic analysis
Economic models
evolutionary game
Exploitation
Game theory
heterogeneity
imitation
Oligopoly
replicator dynamics
Thresholds
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Summary:We consider the competition among quantity setting players in a linear evolutionary environment. To set their outputs, players adopt, alternatively, the best response rule having perfect foresight or an imitative rule. Players are allowed to change their behavior through an evolutionary mechanism according to which the rule with better performance will attract more followers. The relevant stationary state of the model describes a scenario where players produce at the Cournot‐Nash level. Due to the presence of imitative behavior, we find that the number of players and implementation costs, needed to the best response exploitation, have an ambiguous role in determining the stability properties of the equilibrium and double stability thresholds can be observed. Differently, the role of the intensity of choice, representing the evolutionary propensity to switch to the most profitable rule, has a destabilizing role, in line with the common occurrence in evolutionary models. The global analysis of the model reveals that increasing values of the intensity of choice parameter determine increasing dynamic complexities for the internal attractor representing a population where both decision mechanisms coexist.
ISSN:0026-1386
1467-999X
DOI:10.1111/meca.12264