Does Local Monopolistic Approximation imply a less stable equilibrium?

Zhang, Yanfang; Gao, Xing

doi:10.1016/j.orl.2018.08.001

Cited by 2 publications

(2 citation statements)

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“…3, pp: 972-980 973 [12]. Tramontana et al [13] analyzed a Cournot oligopoly with isoelastic demand and linear cost functions in the case of two, three, and four heterogeneous firms. Heterogeneity here refers to different decision mechanisms adopted by each firm.…”

Section: Ibrahim Et Almentioning

confidence: 99%

“…However, by changing the decision mechanism from naive to adaptive expectation, subject to certain conditions on the coefficients in the model, the equilibrium can be stable for really large number of firms. In this paper, a similar Cournot oligopoly to that of Tramontana et al [13] is analyzed for n homogenous firms for four cases that differ based on the decision mechanism adopted.…”

Section: Ibrahim Et Almentioning

confidence: 99%

See 1 more Smart Citation

Local Stability of Cournot Equilibrium as the Number of Firms Increases

Ibrahim¹,

Zaibidi

Saaban³

2021

eijs

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In this paper, a Cournot oligopoly with isoelastic demand function and constant marginal cost is considered. The local stability conditions of the Cournot equilibrium are determined for four models with different decision mechanisms. In the first model, firms adjust their outputs using the best reply response with naive expectations. The second model is a generalization of the first one, where firms have adaptive expectations. Meanwhile, the third and fourth models adopt the bounded rationality and local monopolistic approximation, respectively. The results show that, in the case of identical firms, the Cournot equilibrium is always stable when the firms adopt the local monopolistic approximation mechanism.

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Section: Ibrahim Et Almentioning

confidence: 99%

Section: Ibrahim Et Almentioning

confidence: 99%