Analysis of heterogeneous duopoly game with information asymmetry based on extrapolative mechanism

Abstract

Information plays an important role in decision-making process in oligopoly market. This paper establishes two Cournot duopoly games with information asymmetry based on extrapolative mechanism, and focus on the impacts of information asymmetry from the perspective of stability, complexity and profit. The results show that the extrapolative mechanism plays a different role for heterogeneous expectation firms. In general, proper prediction of rival’s output information is conducive to the improvement of firms’ profit and system stability. However, for firms adopting the adaptive adjustment mechanism, the optimal profit does not occur for the most perfect prediction. Firms who adopt gradient adjustment mechanism are worth to improve prediction accuracy to promote the system stability and the profit. In addition, it is more important for all firms to control their own output adjustment mechanism to gain more profits.