dynamic oligopolies without full information and with continuously distributed time lags abstract dynamic oligopolies are examined without full information on the price function with each firm using a perceived price function that usually differs from the actual inverse demand function of the market it is assumed that firms experience time lags in obtaining and implementing information on the price and also on output under realistic assumptions we show that without time lags the steady state is always locally asymptotically stable whereas in the presence of time lags situations of local instability may occur the possibility of limit cycles is examined and some special cases are considered

oligopoly game price makers meet price takers abstract the paper studies an oligopoly game where firms can choose between price taking and price making strategies on a mixed market price takers are always better off than price makers though the profits of both types decline in the number of price takers we investigate and confront two possibilities of firms decisions about their types forward looking equilibrium reasoning and backward looking individual learning we find that the cournot outcome is the only equilibrium prediction and it is learnable if firms are sufficiently sensitive to profit differences however with a larger number of firms a unilateral deviation from cournot behavior becomes profitable under learning this incentive creates a space for permanent oscillations over different markets with a positive but low number of price takers

precommitment in competing vertical chains the design of distribution channels is an important marketing decision since a revision implies costly reorganization hence it makes sense to study strategic motives of alternative distribution devices a precommitment is a strategic move that affects the other players expectations on how oneself will behave and thus induces them to choose in one s own favor schelling 1960 how these tactics can be used by firms to favorably influence competition between vertical chains is the topic of the literature reviewed in this survey jel classification l22 l42 l81

the analytical derivation and empirical test of a tax adjusted fundamental value model in implementing the theory of current valuation for fixed assets accountants encounter a range of difficult estimation problems many of these problems arise because fixed assets yield their productive potential over many accounting periods theoreticians regulators users and preparers have sought to overcome difficulties in estimating values for owned used assets by estimating the historical cost or the current cost of a new asset and applying a depreciation factor that adjusts for diminished productive capacity the resulting depreciated cost estimate then serves as a proxy for the economic value of the owned used asset previous research has demonstrated that this depreciated cost estimate of economic value is sensitive to both the valuation model and the assumed depreciation schedule see for example greenball 1969 beaver and dukes 1973 beaver and landsman 1983 mohr and dilley 1984 swenson 1987 and kim and moore 1988 the purpose of our study is to extend prior research by examining the interactive

on the complexity of strategy switching dynamics abstract a new approach has been proposed to analyze the strategy switching dynamics in a discrete model or a non cooperative game with the following characteristics i the agents are motivated by absolute payoffs rather than relative ones ii the payoffs vary as the composition of the population changes iii the agents are boundedly rational in the sense that they can only predict the outcomes of their own actions rich dynamic phenomena are exhibited for such discrete dynamic models or games the approach is then applied to explore the relative profitability of price taking behavior in a quantity competing heterogeneous oligopoly

dynamics of the cobweb model with adaptive expectations and nonlinear supply and demand the price quantity dynamics of the cobweb model with adaptive expectations and nonlinear supply and demand curves is analysed we prove that chaotic dynamical behaviour can occur even if both the supply and demand curves are monotonic the introduction of adaptive expectations into the cobweb model leads to price quantity fluctuations with a smaller amplitude however at the same time the price quantity cycles may become unstable and chaotic oscillations may arise we present a geometric explanation why chaos can occur for a large class of nonlinear monotonic supply and demand curves

general equilibrium theory with imperfect competition abstract this survey is organized as follows i introduction ii the main issues iii negishi s model iv objective demand in the cournot nash framework v objective demand in the bertrand nash framework vi the assumption of quasi concavity of the profit functions vii compromises between the conjectural and the objective approach viii insights into the notion of perfect competition ix conclusion

estimating markups and market conduct with multidimensional product attributes we demonstrate how to estimate a model of oligopoly pricing when products are multi dimensionally differentiated we provide an empirical counterpart to recent theoretical work on product differentiation using specifications informed by economic theory we estimate price cost margins for products differentiated in many dimensions

determinacy and identification with taylor rules the new keynesian taylor rule theory of inflation determination relies on explosive dynamics by raising interest rates in response to inflation the fed induces ever larger inflation unless inflation jumps to one particular value on each date however economics does not rule out explosive inflation so inflation remains indeterminate attempts to fix this problem assume that the government will choose to blow up the economy if alternative equilibria emerge by following policies we usually consider impossible the taylor rule is not identified without unrealistic assumptions thus taylor rule regressions do not show that the fed moved from passive to active policy in 1980

side effects of nonlinear profit taxes in an evolutionary market entry model abrupt changes coexisting attractors and hysteresis problems in order to demonstrate that nonlinear tax systems may have surprising and potentially undesirable side effects we develop an evolutionary market entry model in which firms decide on the basis of past profit opportunities whether or not to enter a competitive market our main focus is on the case of a proportional tax on positive profits such a piecewise linear tax scheme induces a kink in the firms profit functions and may lead to abrupt changes in a market s dynamics coexisting attractors and hysteresis problems since these phenomena can also be observed in more general models a proper understanding of their basic mechanism may be helpful to explain the intricate behavior of many economic systems

altruistic versus egoistic behavior in a public good game this paper analyzes an evolutionary version of the public good game in which boundedly rational agents can use imitation and best reply decision rules several possibilities for both decision rules to be present in the population are considered i show that altruistic behavior might survive if switching between the decision rules occurs less often than the probabilities of errors in choosing a strategy and if local neighborhoods are not too small or too large

complicated dynamics in a flow model of the labor market abstract we develop a worker flow model with a nonlinear and endogenous outflow rate from unemployment inconsistent claims on the output lead to changing inflation rates which feedback on job offers through the real money supply via simulations one can show that the nonlinear outflow rate causes asymmetric adjustment of unemployment to the equilibrium rate of unemployment in addition and depending on the parameters the equilibrium rate of unemployment may also become locally unstable then there is a downward sloping phillips curve but no trade off between unemployment and inflation in the short run as there is none in the long run

market organisation and trading relationships in this paper we give a theoretical model of buyers behaviour on a market for a perishable good where no prices are posted we show that if buyers learn from their own previous experience there is a sharp division between those who learn to be loyal to certain sellers and those who continue to shop around this feature remains in more general models which are simulated and is consistent with empirical data from the marseille fish market

cournot walras and locally consistent equilibria abstract a kth order locally consistent equilibrium k lce is an imperfectly competitive general equilibrium allocation at which firms perceive only a kth order taylor expansion of their true demand curves it is shown that under simple regularity conditions the set of kth order locally consistent equilibrium strategies coincides with the set of cournot walras equilibria as soon as k 1 in addition a characterization of the set of negishi equilibria or 0 lces and an existence result for 1 lces in private ownership economies are provided

the persistence of social strategies under increasing competitive pressure abstract in this paper we study the long run outcome if firms are repeatedly matched to play a n firm cournot oligopoly game and can select their type of business objective firms can either be profit maximizing or socially concerned also pursuing consumer welfare we use an indirect evolutionary approach to distinguish between the endogenous profit maximizing choice of the firms business objectives and their corresponding market behavior our main result is that the prospects of long run survival of firms pursuing social strategies strongly depends on the number of firms in the industry if a social strategy entails higher marginal production costs it is best suited if the number of firms in the industry is not too large in particular we demonstrate that the relation between long survival and the level of competitiveness of the industry is inverse u shaped we confirm this result by using the concept of coalition stability and further show that if a high number of firms adopt a social strategy welfare might be lower than with just profit maximizing firms

evolutionary efficacy of a pay for performance scheme with motivated agents the paper studies the short run and long run effects of the introduction of a team oriented pay for performance p4p payment scheme when agents may differ in their degree of intrinsic motivation toward the job suppose that new potential employees were able to assess the expected pay offs of current workers then they may modify their approach to work in order to follow the employee type that earned the highest expected pay off we show that the definition of the scheme needs to take into consideration the effects produced on the evolution of the motivation of new generations in particular the desirability and success of a p4p scheme strongly depend on the way incentives are allocated to the members of a team on the power of the quality related financial incentive and on the economic and social context in which the scheme is introduced the analysis is in part motivated by the introduction in uk in 2004 of a p4p scheme for family practitioners in the uk quality and outcomes framework qof and of a new system of assessing the quality of academic research completed in 2014 research excellence framework ref

limited knowledge of demand and oligopoly equilibria abstract in a standard model of oligopoly with differentiated products the existence of an equilibrium at which the first order conditions for profit maximisation are simultaneously satisfied for all firms is proved and this is done without imposing any restrictions on the demand functions this is an equilibrium in the following sense although some firms may not necessarily be maximising their profits nevertheless if each firm s knowledge of demand is limited to the linear approximation of its own demand curve then it will believe that it is indeed maximising its profits

oligopoly equilibria when firms have local knowledge of demand this paper investigates the existence of oligopoly equilibria when firms arrive through local price experiments at a correct estimation of their demand curves in a neighborhood of a given statu s quo the author provides sufficient conditions for the existence of a local nash equilibrium defined as a point where each firm is at a local maximum of its profit function given the prices charged by th e other firms he also provides two examples one of a duopoly with l ocal nash equilibria but no nash equilibria and the other of a duopol y with no local nash equilibria copyright 1988 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

imitators and optimizers in cournot oligopoly we analyze a symmetric n firm cournot oligopoly with a heterogeneous popu lation of optimizers and imitators imitators mimic the output decision of the most successful firms of the previous round a la vega redondo 1997 optimizers play a myopic best response to the opponents previous output firms are allowed to make mistakes and deviate from the decision rules with a small probability apply ing stochastic stability analysis we find that the long run distribution converges to a recurrent set of states in which imitators are better o than are optimizers this finding appears to be robust even when optimizers are more sophisticated it suggests that imitators drive optimizers out of the market contradicting a funda mental conjecture by friedman 1953

analysis of global bifurcations in a market share attraction model in this paper we demonstrate how the global dynamics of an economic model can be analyzed in particular as an application we consider a market share attraction model widely used in the analysis of interbrand competition in marketing theory we analyze the local and global dynamic properties of the resulting two dimensional noninvertible dynamical system in discrete time the main result of this paper is given by the study of some global bifurcations that change the structure of the attractors and their basins these bifurcations are investigated by the use of critical curves a powerful tool for the analysis of the global properties of noninvertible two dimensional maps 2000 elsevier science b v all rights reserved jel classixcation e32 m30

monetary neutrality under evolutionary dominance of bounded rationality i introduction a key property of the dynamic relationship between money and output is that due to price stickiness monetary shocks have persistent although not permanent impacts on the real output see e g christiano eichenbaum and evans 1999 the nominal adjustment of the aggregate price level in response to a monetary shock is therefore temporarily incomplete and considerable supporting empirical evidence for price rigidity has been found in several microprice studies see e g nakamura and steinsson 2013 and klenow and malin 2011 for comprehensive discussions of these studies mankiw and reis 2002 develop a novel model of temporarily incomplete nominal adjustment based on the assumption that costly information disseminates slowly in each period a random fraction of the price setters updates itself on the state of the economy so as to compute and set the optimal price while the remaining fraction keeps setting prices based on outdated information they admit that micro foundations for price stickiness may require a better understanding of bounded rationality and that information processing is more complex than the time contingent adjustment assumed in their paper in fact as added in mankiw and reis 2011 while the cost of acquiring information may be small and may even have fallen in this information age the costs of absorbing and processing information may be rather large and actually higher today than those in the past this paper contributes to the intuition on price setting under bounded rationality by developing a model in which the share of firms that have up to date information on relative prices to establish the optimal price follows evolutionary dynamics with and without mutation and not a random dynamics a la calvo 1983 as in mankiw and reis 2002 and the related literature our aim is to devise evolutionary game theoretic dynamics to provide alternative microfoundations for a temporarily incomplete nominal adjustment following a monetary shock we investigate the behavior of the general price level in an economy in which an individual firm can either pay a cost featuring a random component to update its information set and establish the optimal price nash strategy or freely use full information from the previous period and set a one period lagged optimal price bounded rationality strategy indeed detailed empirical studies such as the investigation for the euro zone by alvarez et al 2006 have found persistent coexistence of forward looking and backward looking price setting behavior and there is also robust empirical evidence showing persistent and time varying heterogeneity both in the frequency and in the extent of information updating see e g branch 2007 coibion and gorodnichenko 2012 we then devise evolutionary game theoretic microdynamics in discrete time that by interacting with the dynamics of the macroeconomic variables affects the coevolution of the frequency distribution of information updating strategies across firms and the completeness of the nominal adjustment of the general price level to a monetary shock our model economy is composed of monopolistically competitive firms whose individual optimal price depends positively upon the prices set by others implying the existence of strategic complementarity in a given period there is a fraction of firms that set prices without perfect knowledge of the structure of relative prices and hence of the prices that other firms will be setting as they decide not to pay the information cost involved in knowing it we refer to these firms as boundedly rational firms the remaining fraction is composed of firms that decide to incur the information updating cost to obtain that perfect knowledge and we follow droste hommes and tuinstra 2002 in referring to them as nash firms as they become perfect foresight firms meanwhile the optimal price is assumed to be given as in ball and romer 1991 varying positively with the actual general price level and nominal stock of money which is publicly known

replicator dynamics in a cobweb model with rationally heterogeneous expectations abstract this paper extends the adaptively rational equilibrium dynamics of brock and hommes brock w a hommes c h 1997 a rational route to randomness econometrica 65 1059 1160 by introducing a generalized version of the replicator dynamic the replicator equilibrium dynamics red couples the price dynamics of a cobweb model with predictor selection governed by an evolutionary replicator dynamic we show that the red supports the conclusion of sethi and franke sethi r franke r 1995 behavioural heterogeneity under evolutionary pressure macroeconomic implications of costly optimisation the economic journal 105 583 600 that costly rational beliefs persist though unlike them these results obtain in the deterministic case numerical evidence shows that complex dynamics exist as in brock and hommes even though no weight is placed on strictly dominated predictors in an red steady state

evolutionary competition in a mixed market with socially concerned firms abstract in this paper we study an oligopoly market where profit maximizing firms and socially concerned firms compete in quantities confronting remarks by milton friedman and gary becker we are using an evolutionary setting to investigate the endogenous choice of the proper objective of business firms and the influence of product differentiation on the long run survival of firms which pursue non profit motives we find that firms which consider a combination of profit and consumer welfare can indeed have larger market shares and profits than their profit maximizing rivals one insight is that it might pay off for shareholders to consider stakeholder welfare but that the level of social concern should not be too high based on a strategy s profitability we consider asynchronous evolutionary updating with firms selecting nash quantities or choosing best replies to the expected market quantity here we observe that the consumers willingness to pay a price premium for products is crucial for the long run survival of socially concerned firms depending on the degrees of product differentiation and social concern long run outcomes consist either of both types of firms or only one type of firm if the firms propensity to switch between a social or a profit maximizing strategy is sufficiently large steady states are unstable and even complicated dynamics can occur

an illustration of the essential difference between individual and social learning and its consequences for computational analyses abstract drawing a conclusion from recent insights in evolutionary game theory we show that a so called spite effect implies that there is an essential difference between individual and social learning we illustrate its consequences for the choice of computational tools in economics and social settings in general by analyzing two variants of a genetic algorithm

oligopoly games with local monopolistic approximation we propose an oligopoly game where quantity setting firms have incomplete information about the demand function at each time step they solve a profit maximization problem assuming a linear demand function and ignoring the effects of the competitors outputs despite such a rough approximation that we call local monopolistic approximation lma the repeated game may converge at a nash equilibrium of the game played under the assumption of full information an explicit form of the dynamical system that describes the time evolution of oligopoly games with lma is given for arbitrary differentiable demand functions provided that the cost functions are linear or quadratic in the case of isoelastic demand we show that the game based on lma always converges to a nash equilibrium this result compared with best reply dynamics shows that in this particular case less information implies more stability

learning cycles in bertrand competition with differentiated commodities and competing learning rules this paper stresses the importance of heterogeneity in learning we consider a bertrand oligopoly with firms using either least squares learning or gradient learning for determining the price we demonstrate that convergence properties of the rules are strongly affected by heterogeneity in particular gradient learning may become unstable as the number of gradient learners increases endogenous choice between the learning rules may induce cyclical switching stable gradient learning gives higher average profit than least squares learning making firms switch to gradient learning this can destabilize gradient learning which because of decreasing profits makes firms switch back to least squares learning

complicated endogenous business cycles under gross substitutability abstract in this paper we investigate the global behaviour of the output equilibrium time paths in a two dimensional overlapping generations model with productive investment and capital accumulation where agents behave rationally and markets are competitive we show that equilibrium time paths can converge to complicated chaotic attractors as well as periodic attractors when the substitution effect dominates the income effect everywhere the occurrence of complicated equilibrium paths is guaranteed by homoclinic intersections of the stable and unstable manifolds of the autarkic steady state journal of economic literature classificiation number e32

the coexistence of stable equilibria under least squares learning abstract in this paper we consider firms that learn about market conditions by estimating the demand function using past market data we show that learning may lead to suboptimal outcomes even when the estimated demand function perfectly fits the observations used in the regression and firms thus perceive to have learned the demand function correctly we consider the salop model with three firms and two types of consumers that differ in their sensitivity to product differences firms do not know the demand structure and they apply least squares learning to learn the demand function in each period firms estimate a linear perceived demand function and they play the perceived best response to the previous period price of the other firms this learning rule can lead to three different outcomes a self sustaining equilibrium the nash equilibrium or an asymmetric learning equilibrium in this last equilibrium one firm underestimates the demand for low prices and it attracts consumers with high sensitivity only this type of equilibrium has not been found in the literature on least squares learning before both the nash equilibrium and the asymmetric learning equilibrium are locally stable therefore the model has coexisting stable equilibria

genetic algorithm learning and the cobweb model this paper presents the cobweb model in which competitive firms in a market for a single good use a genetic algorithm to update their decision rules about next period production and sales the results of simulations show that the genetic algorithm converges to the rational expectations equilibrium for a wider range of parameter values than other algorithms frequently studied within the context of the cobweb model price and quantity patterns generated by the genetic algorithm are also compared to the data of experimental cobweb economies it is shown that the algorithm can capture several features of the experimental behavior of human subjects better than three other learning algorithms that are considered

cournot duopoly when the competitors operate multiple production plants this article considers a cournot duopoly under an isoelastic demand function and cost functions with built in capacity limits the special feature is that each firm is assumed to operate multiple plants which can be run alone or in combination each firm has two plants with different capacity limits so each has three cost options the third being to run both plants dividing the load according to the principle of equal marginal costs as a consequence the marginal cost functions come in three disjoint pieces so the reaction functions derived on basis of global profit maximization may also consist of disjoint pieces this is reflected in a particular bifurcation structure due to border collision bifurcations and to particular basin boundaries related to the discontinuities it is shown that stable cycles may coexist and the non existence of unstable cycles constitutes a new property we also compare the coexistent short periodic solutions in terms of the resulting real profits

a robust rational route to randomness in a simple asset pricing model abstract we investigate asset pricing dynamics in an adaptive evolutionary asset pricing model with fundamentalists trend followers and a market maker agents can choose between a fundamentalist strategy at positive information cost or choose a trend following strategy for free price adjustment is proportional to the excess demand in the asset market agents asynchronously update their strategy according to realized net profits in the recent past as agents become more sensitive to differences in strategy performance the fundamental steady state becomes unstable and multiple steady states may arise as the traders sensitivity to differences in fitness increases a bifurcation route to chaos sets in due to homoclinic bifurcations of stable and unstable manifolds of the fundamental steady state

living in an imaginary world that looks real abstract in the paper we show using standard approaches general equilibrium modeling and the assumption of complete rationality that the macroeconomic environment is endogenous and is indeterminate specifically it is argued without resorting to sunspot type arguments that microeconomic fundamentals do not suffice to characterize the economy at the macro level in particular we show how perceptions of rational agents of the workings of the economy a shape the environment b affect the environment sufficiently to ensure that rational economic agents find the observed environment consistent with their beliefs even though it is not as a by product we illustrate that endogenous macro uncertainty can arise as an outcome if rational economic agents whose expectations are anchored on endogenous variables expect them to arise finally we show that systematic errors can persist indefinitely under rationality

price taking behavior versus continuous dynamic optimizing abstract in a quantity competition oligopoly previous studies have shown that a price taking firm can outperform any rival with identical technology that produces at a different output level at any intertemporal equilibrium this research seeks to examine this seemingly counter intuitive fact in a heterogeneous duopoly consisting of an adaptive price taker and a dynamic optimizer who dynamically optimizes its either absolute or relative profit stream over an infinite planning horizon with conventional economic assumptions the hamiltonian system always converges to a saddle point if goal of the dynamic optimizer is absolute profit the price taker produces more than the dynamic optimizer at the equilibrium around which there exists a long run relative profitability portion for the price taker consequently the price taker unconsciously makes higher relative profit than the dynamic optimizer in the long run in contrast if the dynamic optimizer pursues the relative profit both firms produce at the competitive level at the equilibrium while the whole optimal path lies in the relative profitability regime of the dynamic optimizer so that it will enjoy a higher profit than the price taker before reaching equilibrium these results provide economical justification for ever growing evolutionary game theoretical literatures in appreciating price taking behavior and additionally clarify possible misunderstandings in interpreting their conclusions

the evolution of walrasian behavior consider an evolutionary context where a given number of quantity setting oligopolists tend to mimic successful behavior occasionally experimenting with some small probability in this context it is shown that the unique long run outcome of the process has all firms playing walrasian i e choosing an output that maximizes profits when taking the market clearing price as given

an evolutionary cournot model with limited market knowledge abstract in this paper we analyze a dynamic game of cournot competition with heterogeneous firms choosing between two different adaptive behavioral rules in deciding output strategies the underlying oligopoly structure is standard using a constant return to scale technology n firms produce homogeneous goods which are sold in a market characterized by constant price elasticity in this setup we assume that a fraction of firms employs a quite rough rule of thumb the so called local monopolistic approximation lma whereas the complementary fraction plays best reply br a more demanding strategy in terms of information and computation requirements the model is first considered with exogenously fixed fractions of firms in the two complementary groups then it is generalized by considering an endogenous evolutionary switching process between the two behavioral strategies based on profit driven replicator dynamics the role of the number of firms information costs and inertia or anchoring attitude in production decisions is analyzed as well as the influence in the evolutionary process of random noise in the demand function and memory of past profits global properties of the oligopoly with evolutionary pressure between behavioral rules are discussed with particular regard to cases in which the nash equilibrium is unstable

the structure of technology with endogenous capital utilization a model is presented for the estimation of production technology when capital is endogenously utiliz ed the present model permits the firm to choose the rate of utilizat ion and level of maintenance applied to its capital equipment such th at the user cost of capital services is minimized the model is one o f two stage optimization and estimation the two stages are integrate d using duality theory through the generation of an instrumental us er cost variable in the first stage the instrumental user cost is th en utilized for the estimation of the aggregate technology the resul ts are compared to results obtained from standard models with exogeno us capital utilization and the emerging biases are discussed copyright 1988 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

monopolistic competition and bounded rationality abstract this paper shows how a market reaches a unique steady state in monopolistic competition without knowing anything about strategic interdependence and only perceiving a linear demand for its own product every firm follows a simple price strategy to maximize its current profit in each period the strategy is based on a firm s own cost function slope estimate and its sales and price in the previous period we show that a market with asymmetric and non linear demand converges to a unique steady state under rather general conditions

q and the tax bias theory abstract a growing body of literature analyzes the variation in q the ratio of financial market value to asset current replacement cost and makes inferences about attributes such as monopoly power profitability managerial performance etc these studies ignore potential biases embedded in q that result from non neutral tax policies this study examines the association between q and tax biases and establishes that differences in accumulated depreciation tax shields explain significant variation in q the implication that q should be adjusted for tax biases before use in empirical research is examined further adjusting q for tax biases at least with the factors herein leads only to minor changes in econometric analyses

economic vs accounting depreciation abstract in this paper we present and estimate a model of economic depreciation consistent with producer s optimization the estimated economic depreciation which is a function of the rate of utilization and level of maintenance is about half of that used according to tax accounting depreciation the difference between the economic and tax rates of depreciation results in a subsidy and earlier capital replacement the implicit maximum net tax subsidy expressed as a proportion of the acquisition price of the asset is 13 3 for a sample of canadian trucking firms

heterogeneous beliefs and the non linear cobweb model abstract this paper generalizes the evolutionary cobweb model with heterogeneous beliefs of brock and hommes 1997 econometrica 65 1059 1095 to the case of non linear demand and supply agents choose between a simple freely available prediction strategy such as naive expectations and a sophisticated costly prediction strategy such as rational expectations and update their beliefs according to an evolutionary fitness measure such as past realized net profits it is shown that for generic non linear monotonic demand and supply curves the evolutionary dynamics exhibits rational routes to randomness that is bifurcation routes to strange attractors occur when the traders sensitivity to differences in evolutionary fitness increases

evolution of repeated prisoner s dilemma play under logit dynamics in an evolutionary set up we append an ecology of iterated prisoner s dilemma ipd game strategies consisting of unconditional cooperators allc unconditional defectors alld and reactive players tft with two repeated strategies that have received less attention in the evolutionary ipd game literature the error proof generous tit for tat gtft which with a certain probability re establishes cooperation after a possibly by mistake defection of the opponent and the penitent stimulus response wsls strategy that resets cooperation after the opponent punished for defection an abundance of rock paper scissors like patterns is discovered in the 3x3 ecologies comprising pavlovian and generous gtft players interestingly the evolutionary success of pavlov seems to depend on the absence of unconditional allc cooperators in the ecologies investigated

managing rational routes to randomness abstract within the seminal cobweb model of brock and hommes firms adapt their price expectations by a profit based switching behavior between free naive expectations and costly rational expectations brock and hommes demonstrate that fixed point dynamics may turn into increasingly complex dynamics as the firms intensity of choice increases we show that policy makers are able to manage such rational routes to randomness by adjusting profit taxes in particular policy makers should increase decrease profit taxes if destabilizing expectations generate higher lower profits than stabilizing expectations to alter the composition of applied expectation rules and thereby to promote market stability our results are not restricted to cobweb models a huge body of literature demonstrates that rational routes to randomness may emerge in many different markets

robustly optimal monetary policy with near rational expectations the paper considers optimal monetary stabilization policy in a forward look ing model when the central bank recognizes that private sector expectations need not be precisely model consistent and wishes to choose a policy that will be as good as possible in the case of any beliefs that are close enough to model consistency it is found that commitment continues to be important for optimal policy that the optimal long run inflation target is unaffected by the degree of potential distortion of beliefs and that optimal policy is even more history dependent than if rational expectations are assumed jel c62 d84 el 3 e31 e32 e52 an extensive literature has considered the optimal conduct of monetary policy under the assumption of rational or model consistent expectations this literature has found that it is quite important to take account of the effects of the systematic and hence predictable compo nent of monetary policy on expectations for example it is found quite generally that an optimal policy commitment differs from the policy that would be chosen through a sequential optimiza tion procedure with no advance commitment of future policy it is also found quite generally that optimal policy is history dependent a function of past conditions that no longer affect the degree to which it would be possible to achieve stabilization aims from the present time onward 1 both of these conclusions depend critically however on the idea that an advance commitment of future policy should change people s expectations at earlier dates this may lead to the fear that analyses that assume rational expectations re exaggerate the degree to which a policy authority can rely upon private sector expectations to be shaped by its policy commitments in precisely the way that it expects them to be what if the relation between what a central bank plans to do and what the public will expect to happen is not quite so predictable might both the case for advance commitment of policy and the case for history dependent policy be considerably weakened under a more skeptical view of the precision with which the public s expectations can be predicted one way of relaxing the assumption of rational expectations is to model agents as forecasting using an econometric model the coefficients of which they must estimate using data observed prior to some date sampling error will then result in forecasts that depart somewhat from pre cise consistency with the analyst s model 2 however selecting a monetary policy rule on the basis of its performance under a specific model of learning runs the risk of exaggerating the degree to which the policy analyst can predict and hence exploit the forecasting errors that result from a particular way of extrapolating from past observations one might even conclude

flexibility choices and oligopolistic competition in an evolutionary environment we study the problem of the endogenous choice of technology when the level of demand is uncertain firms can choose either a flexible technology which allows them to vary the cost structure or a rigid technology which in periods of high demand is more efficient firms tend to adopt the ex ante more rewarding technology we develop a full dynamic model with given number of firms as well as with entry and exit and with perfect foresight as well as with myopic firms we show that firms with different technologies can coexist in the market in a permanent way and characterise the parameter configurations leading to such results

experimentation imitation and stochastic stability abstract do boundedly rational agents repeatedly playing a symmetric game with a unique symmetric equilibrium learn over time to play it in this paper we model the dynamic interaction of two types of such agents experimenters and imitators whose behavior is characterized by simple rules of thumb we find that the stochastic process describing their play isstable in the large it converges globally and with probability one to a compact neighborhood of the equilibrium however its local behavior near the equilibrium depends in interesting ways on the details of the model journal of economic literatureclassification number d83

anything goes with heterogeneous but not always with homogeneous oligopoly abstract corchon and mas colell 1996 on the stability of best reply and gradient systems with applications to imperfectly competitive models economics letters 51 59 65 showed that in heterogeneous oligopoly almost everything is possible in order to obtain a similar result for homogeneous oligopoly either one needs an externality in the cost function or the reaction correspondences should fulfill a special condition

learning to play cournot duopoly strategies abstract the paper reports results from experiments designed to determine whether subjects can learn to play cournot duopoly strategies and whether their out of equilibrium play is consistent with the predictions of learning models the experiments include duopolies with constant and with decreasing marginal costs and with theoretically stable and unstable equilibria after a few periods subjects do play stable interior equilibria but they do not play stable boundary equilibria nor unstable interior equilibria subjects out of equilibrium play is inconsistent with the predictions of the learning models

a naive but optimal route to walrasian behavior in oligopolies a paradoxical phenomenon where irrationality or ignorance lead to higher profits is shown to prevail in an oligopolistic market where three firms produce a homogeneous product with identical technologies under the conventional assumption on the convexity of cost function the profit made by a naive price taker will always be higher than or at least as much as the other two rivals no matter what kind of strategies the latter may take and whether they form a coalition or not by sticking to the price taking strategy a firm always gains a positive profit improvement should any one of its rivals try to upgrade from price taker to the cournotor with these incentives a firm prefers to remain as a naive price taker

stochastic adaptation in finite games played by heterogeneous populations we analyze stochastic adaptation in finite n player games played by heterogeneous populations containing best repliers better repliers and imitators individuals select strategies by applying a

the long run benefits of chaos to oligopolistic firms abstract conventional economic beliefs that equilibrium is better than disequilibrium and stability is better than fluctuation are challenged with a heterogeneous oligopolistic model that consists of a naive firm and a group of sophisticated firms the naive firm is assumed to adopt a simple cobweb strategy while the sophisticate firms who command all market information form a collusion and best respond the naive firm s current action when the market equilibrium is unstable the naive firm is able to turn an explosively diverging market into a bounded but chaotic one by adopting simultaneously a cautious adjustment strategy that is limiting the growth rate of output there exists an upper bound such that as long as the growth rate does not exceed this bound the average profits made by all oligopolistic firms are higher than their respective equilibrium profits moreover the average economic surplus can also be higher than the equilibrium surplus in this sense chaos is beneficial not only to all oligopolistic firms but also to the economy as a whole

endogenous fluctuations under evolutionary pressure in cournot competition abstract an evolutionary game theoretic model of cournot competition is investigated individuals choose from a finite set of different behavioral rules each rule specifies the quantity to be produced in the current period as a function of past quantities using more sophisticated rules may require extra information costs based upon realized payoffs the fractions of the population choosing a certain behavioral rule are updated according to the replicator equation with noise the long run behavior of the evolutionary system consisting of the population dynamics coupled with the quantity dynamics of the cournot game may be complicated and endogenous fluctuations may arise we consider a typical example where firms can choose between two rules the nash rule and the best reply rule we show that a homoclinic tangency between the stable and unstable manifold of the equilibrium occurs as evolutionary pressure increases implying bifurcation routes to complicated dynamics and strange attractors

imitators and optimizers in a changing environment abstract we analyze the repeated interaction between an imitating and a myopically optimizing player in an otherwise symmetric environment of changing marginal payoff focusing on finite irreducible environments and the case of strategic substitutes we unfold a trade off between the degree of interaction and the size of environmental shocks the optimizer outperforms the imitator if interaction is weak or shocks are large as to the case of duopoly this translates into small cross price elasticities or large shocks in marginal cost and or the maximum willingness to pay in these cases a changing environment creates selection pressure against imitative behavior

market efficiency and learning in an endogenously unstable environment abstract an informationally inefficiency market is produced without an exogenous source of noise in the price fundamental traders acquire private information directly through research regression traders employ a learning process to extract the private fundamental information from the public price the relative popularity between these two strategies evolves based on performance the model converges towards adoption of regression analysis to the point of creating instability endogenously producing a noisy price the lack of a revealing price in the coupled learning and population processes reflects the grossman and stiglitz amer econ rev 70 3 1980 393 impossibility of informationally efficient markets

inflation and the tax treatment of firm behavior in the past decade economists have be gun to realize that inflation even when fully anticipated constitutes a great deal more than a tax on money balances the primary reason for inflation s wider impact is the existence of a tax system designed with stable prices in mind this paper offers a brief summary of the effects of inflation on the tax treatment of the firm focusing on four important decisions the firm makes the scale of investment the method of finance the durability of assets used in production and the holding period of these assets there are a number of interesting and related issues which cannot be covered in a paper of this length as i will be considering inflation that is both uniform and fully anticipated questions concerning the behavior of the firm in response to uncertainty about inflation or to a concommitant change in relative prices will not arise this abstract was borrowed from another version of this item

locally consistent oligopolistic equilibria are cournot walras equilibria abstract a kth order locally consistent equilibrium is an imperfectly competitive general equilibrium point at which firms only perceive at kth order taylor expansion of their true demand curves it is shown that the set of kth order locally consistent equilibrium strategies coincides with the set of cournot walras equilibria as soon as k 1 under simple regularity conditions

cournot versus walras in dynamic oligopolies with memory abstract this paper explores the impact of memory in cournot oligopolies where firms learn through imitation of success as suggested in alchian j polit econ 57 1950 211 and modeled in vega redondo econometrica 65 1997 375 as long as memory includes at least one period the long run outcome corresponds to any quantity between the cournot one and the walras one the evolutionary stability of the walrasian outcome relies on interfirm comparisons of simultaneously observed profits i e whether a firm earns more than others in a given period whereas the stability of the cournot nash equilibrium is derived from intertemporal comparisons of profits for each given firm i e whether a deviation pays off for that firm

on the existence of cournot equilibrium this paper examines the existence of n firm cournot equilibrium in a market for a single homogeneous commodity it proves that if each firm s marginal revenue declines as the aggregate output of other firms increases which is implied by concave inverse demand then a cournot equilibrium exists without assuming that firms have nondecreasing marginal cost or identical technologies also if the marginal revenue condition fails at a potential optimal point there is a set of firms such that no cournot equilibrium exists the paper also contains an example of nonexistence with two nonidentical firms each with constant returns to scale production