keeping up with the joneses competition and the evolution of collusion an economy consists of many markets each of which is a duopoly firms must earn normal profits in the long run if they have to survive normal profits are interpreted as the long run limit of average profits in the whole economy we adopt an aspiration based model of firm behaviour linking it to the economy with the requirement that in the long run the profit aspiration must be at least as great as normal profits we assume that the joint profits can be maximized with symmetric payoffs and with very few other assumptions are able to show that the almost global attractor is the cooperative outcome

two stage equilibrium and product choice with elastic demand abstract this paper examines a two stage model of product choice with elastic demand duopolists choose locations and then prices consumers demand is linear in price transportation cost is quadratic and is a lump sum for each pair of locations there is a price equilibrium in the second stage the first stage equilibrium locations are unique symmetric and depend upon the ratio of the reservation price and the transportation cost parameter when this ratio exceeds a certain critical value the locations are at the extreme end points of the market as the ratio decreases the locations gradually move towards the center

the retail price of inequality abstract this paper studies the relation between a city s income distribution and its retail price level using panel data we find that an increase in the presence of lower middle income households relative to poor or upper income households is associated with lower prices our findings suggest that greater income inequality raises the prices that poor households face thus making it harder for them to invest in human capital

why do you hate me on the survival of spite abstract spite involves harming others without good reasons it may survive in small populations or on markets with strategic substitutes we consider situations where selfishness helps efficiency here spite endangers efficiency but is wiped out by evolutionary forces

on the equivalence of nash and evolutionary equilibrium in finite populations abstract this paper provides sufficient and partially necessary conditions for the equivalence of symmetric nash and evolutionary equilibrium in symmetric games played by finite populations the conditions are based on generalized constant sum and smallness properties the latter of which is known from models of perfect competition and large games the conditions are illustrated on examples including oligopoly games

cooperation through imitation abstract this paper characterizes long run outcomes for broad classes of symmetric games when players select actions on the basis of average historical performance received wisdom suggests that when agent s interests are partially opposed behavior is excessively competitive keeping up with the jones lowers everyones welfare here we study the long run consequences of imitative behavior when agents have sufficiently long memories and evaluate past actions in terms of weighted average payoff imitation robustly leads to cooperative outcomes with highest symmetric payoffs in the long run furthermore lengthening memory reinforces this effect this provides a rationale for example for collusive cartel like behavior without collusive intent

supply chain disruption management and evolutionarily stable strategies of retailers in the quantity setting duopoly situation with homogeneous goods this paper develops an indirect evolutionary game model with two vertically integrated channels to study evolutionarily stable strategies ess of retailers in the quantity setting duopoly situation with homogeneous goods and analyzes the effects of the demand and raw material supply disruptions on the retailers strategies every channel consists of one manufacturer and many a sufficiently large number of retailers that sell products in different markets by adopting two pure marketing strategies profit maximization and revenue maximization we find that revenue maximization strategy may prevail and profit maximization strategy may become extinct two strategies may coexist i e all retailers in one channel will choose profit maximization strategy and all retailers in the other will choose revenue maximization strategy the ess of retailers depends on the relative size of the market scale and unit cost the supply chain disruptions affect the ess of retailers we also introduce a recovery model of the supply chain under disruptions and illustrate the effect of disruptions on the ess and on the average profits of channels in a market using a numerical simulation

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

evolutionary equilibrium in contests with stochastic participation entry effort and overdissipation this paper examines the evolutionary stability of behaviour in contests where players participation can be stochastic we find for exogenously given participation probabilities players exert more effort under the concept of a finite population evolutionarily stable strategy fpess than under nash equilibrium ne we show that there is ex ante overdissipation under fpess for sufficiently large participation probabilities if and only if the impact function is convex with costly endogenous entry players enter the contest with a higher probability and exert more effort under fpess than under ne importantly under endogenous entry overdissipation can occur for all tullock contest success functions in particular those with concave impact functions

competitive behavior in market games evidence and theory we explore whether competitive outcomes arise in an experimental implementation of a market game introduced by shubik 1972 market games obtain pareto inferior strict nash equilibria in which some markets are closed we find that subjects do not coordinate on autarkic nash equilibria but favor more efficient nash equilibria in which all markets are open as the number of subjects participating in the market game increases the nash equilibrium they achieve approximates the associated walrasian equilibrium of the underlying economy motivated by these findings we investigate theoretically whether evolutionary forces lead to walrasian outcomes in market games we introduce a strong version of evolutionary stable strategies sess f orfinite populations our concept requires stability against deviations by coalitions of agents a small coalition of trading agents is sufficient for pareto improving trade to be generated in addition provided that agents lack market power nash equilibria corresponding to approximate competitive outcomes constitute the only approximate sess

a nonparametric distribution free test for serial independence in stock returns a fundamental statistical test of serial independence is developed and applied to daily stock returns let xt be the deviation of the daily return on a stock from its sample mean after any autocorrelation present has been removed if xt is serially independent then the cumulative sum of xt over time is the position of a one dimensional random walk on a line the empirical distribution of step lengths over a large sample allows the distribution ofthe largest absolute excursion in a f step walk to be calculated by repeated simulation the observed maximal excursions are found to be significantly smaller than one would expect based on serial independence and the observed distribution of step lengths it is concluded that these daily stock returns are not serially independent and that the market value of the corporations studied has a tendency to return to an interval around the trend value

aggregate comparative statics abstract in aggregative games each player s payoff depends on her own actions and an aggregate of the actions of all the players many common games in industrial organization political economy public economics and macroeconomics can be cast as aggregative games this paper provides a general and tractable framework for comparative static results in aggregative games we focus on two classes of games 1 aggregative games with strategic substitutes and 2 nice aggregative games where payoff functions are continuous and concave in own strategies we provide simple sufficient conditions under which positive shocks to individual players increase their own actions and have monotone effects on the aggregate the results are illustrated with applications to public good provision contests cournot competition and technology choices in oligopoly

survival at the center the stability of minimum differentiation abstract we model a hotelling market with multidimensional product differentiation in an evolutionary framework both evolutionary stability in the sense of schaffer 1989 and stochastic stability following kandori et al 1993 young 1993 are analyzed it is shown that firms move towards the center in product space i e a principle of minimum differentiation on all dimensions of the product space applies

convergence in the finite cournot oligopoly with social and individual learning abstract convergence to the nash equilibrium in a cournot oligopoly is a question that recurrently arises as a subject of controversy in economics the development of evolutionary game theory has provided an equilibrium concept more directly connected with adjustment dynamics and the evolutionary stability of the equilibria of the cournot game have been extensively studied in the literature several articles show that the walrasian equilibrium is the stable ess of the cournot game but no general result has been established for the difficult case of simultaneous heterogenous mutations authors propose specific selection dynamics to analyze this case vriend 2000 proposes using a genetic algorithm for studying learning dynamics in this game and obtains convergence to cournot equilibrium with individual learning the resulting convergence has been questioned by arifovic and maschek 2006 the aim of this article is to clarify this controversy it analyzes the mechanisms that are behind these contradictory results and underlines the specific role of the spite effect we show why social learning gives rise to the walrasian equilibrium and why in a general setup individual learning can effectively yield convergence to the cournot equilibrium we also illustrate these general results by systematic computational experiments

variation in retail costs for fresh vegetables and salty snacks across communities in the united states abstract households living in different communities pay different amounts of money for food food costs depend on whether a household lives in an urban community or in a locality with a high incidence of poverty among other factors this study focuses on spatial variation across the united states in the retail costs for fresh vegetables and salty snacks findings reveal that the major economic and demographic characteristics of a household s community affect its costs for these two types of foods differently however households are likely to pay more money for salty snacks in communities where fresh vegetables also cost more

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

wholesale pricing and evolutionarily stable strategies of retailers with imperfectly observable objective abstract this paper develops a one population indirect evolutionary game model of a supply chain with one manufacturer supplier and many a sufficiently large number of retailers to study how the retailer s marketing objective depends on the wholesale price its observability the error probability of the observed result on the rival s preference the market scale and the retailer s bargaining power this paper also presents an algorithm for computing the optimal wholesale price of the manufacturer we find that the profit revenue maximization behavior is an evolutionarily stable marketing strategy if the wholesale price is sufficiently high low given an appropriate wholesale price the revenue maximization behavior coexists with the profit maximization behavior in the retailers population the larger the market scale the stronger the motivation of the retailer to take profit maximization behavior due to a higher wholesale price the cross effects of the retailer s reservation payoff and the other factors should be considered in the decision process

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

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

a nonparametric distribution free test for serial independence in stock returns a correction a fundamental statistical test of serial independence developed by ashley and patterson 1986 to examine a possible form of serial dependence in daily stock returns is shown to be improperly constructed as a consequence the significance probabilities that they ob tain are overstated this paper presents a corrected version of their test the test statistic obtained after correction is shown to possess the same limiting distribution as the kolmogorov smirnov test statistic applying the corrected test procedure to data identical to that used by ashley and patterson we find that their original null hypothesis can no longer be rejected at conventional significance levels

a new venture s optimal entry time abstract we formulate a model of the decision of when a new venture should enter the market based on the uncertain evolution over time of environmental volatility and market competition we characterize the performance maximizing time to enter the market and show how this entry time is affected by changes in the business environment by further focusing our modeling assumptions we are able to translate our time based criteria into environmental terms and propose that management set a target environment level that must be met before entering the market we also demonstrate that management should adjust this target over time to respond to changes in the business context this modeling feature is important because it allows for a better assessment of when to enter a market based on future performances we translate the model s theoretical insights into testable propositions and explore possible ways to operationalize these for empirical testing

the effect of ownership structure on prices in geographically differentiated industries i analyze how ownership structure and market geography jointly influence fast food prices i estimate a model of demand and supply that accounts for the market geography and run counterfactual experiments that demonstrate how mergers affect prices i find that the impact of mergers can be large that this impact decreases as the merging outlets are farther apart that mergers among market leaders generally increase prices more than mergers among weaker firms and that mergers can increase prices even if the outlets are so far apart that neither outleti s presence affects prices at the other before the merger

do fast food chains price discriminate on the race and income characteristics of an area this article reports tests for differences in prices charged by fast food restaurants that serve markets with customers of widely divergent incomes and ethnic backgrounds the data contain detailed prices on items sold at over 400 burger king wendy s kfc and roy rogers restaurants in new jersey and pennsylvania locations i find significant differences in price based on the race and income characteristics of a zip code region when income and cost differences are taken into account meal prices rise approximately 5 for a 50 rise in the black population

household consumption of food away from home total expenditure and by type of food facility consistent with prior expectations based on household production theory household income time value size and composition and the environment in which production and consumption occurred were all important determinants of total household expenditures on food away from home however the importance of these factors varied by type of food facility conventional restaurants fast food facilities and other commercial establishments decomposition of the tobit elasticities indicated the differential importance of market participation effects of household size income and time value by level of the variable and by type of food facility

evolutionary stability and nash equilibrium in finite populations with an application to price competition abstract schaffer schaffer m e 1988 evolutionarily stable strategies for a finite population and a variable contest size journal of theoretical biololgy 132 469 478 proposed a concept of evolutionary stability for finite population models that has interesting implications in economic models of evolutionary learning since it is related to perfectly competitive equilibrium the present paper explores the relation of this concept to nash equilibrium in particular classes of games including constant sum games games with weak payoff externalities and games where imitative decision rules are individually improving an illustration of the latter is provided in the context of bertrand oligopoly with homogeneous product which allows for a characterization of the set of evolutionarily stable prices

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

cournot competition imitation and information networks abstract we develop a stochastic learning model of cournot competition on arbitrary networks where firms can only observe local information and imitate the locally best the walrasian equilibrium is uniquely selected for any connected information network

tax competition relative performance and policy imitation rather than about their absolute payoffs governments in fiscal competition often seem to care about their performance relative to other governments moreover they often appear to mimic policies observed elsewhere i study such behavior in a standard tax competition game both with relative payoff concerns and for imitative policies evolutionary stability for games with finitely many players is the appropriate solution concept independently of the number of jurisdictions involved an evolutionarily stable tax policy coincides with the competitive outcome of a tax competition game with infinitely many players it thus involves drastic efficiency losses

the evolution of preferences and competition a rationalization of veblen s theory of invidious comparisons we examine how preferences evolve by natural selection in a competitive environment similar to that characterizing much of our evolutionary past we find that the evolutionarily stable preferences in this context exhibit a concern not only for absolute payoffs but also for relative payoffs and that this intensifies the degree of competition relative to what obtains when players consider only absolute payoffs we argue that this has consequences for the equilibrium population size we argue that the premise of this analysis is consistent with the available anthropological evidence and that the prediction is broadly consistent with the findings of experimental game theory

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

us and them the origin of identity and its economic implications we investigate the origins of identity and the innate proclivity to draw a distinction between insiders and outsiders we propose an evolutionary explanation we argue that identity arises because it facilitates survival in an evolutionary setting we endogenize preferences and demonstrate that the evolutionarily stable preferences fashioned by natural selection would draw a distinction between insiders and outsiders we then work out the implications of such preferences in two contemporary scenarios one entailing rent seeking behavior and the other involving public good provision our results are in conformity with empirical evidence

a nonparametric distribution free test for serial independence in stock returns a comment we have confirmed that corrado and schatzberg s 1990 criticism of our test for serial independence in stock returns ashley and patterson 1986 is correct the corrected results still favor rejection of the null hypothesis that the daily returns for several stocks notably holly sugar hly and e systems esy are serially independent but only at the 12 percent and 14 percent significance levels respectively evidently this kind of test is long on simplicity and intuitive appeal but short on power

an experimental investigation of the impact of information on competitive decision making managers often employ market response models as decision aids and historical information of competitors market outcomes to aid their competitive decisions in oligopolistic settings however little is known about how access to a decision aid or the availability of competitors market outcomes impact a firm s competitive decisions e g prices or market outcomes resulting from those decisions e g profits or how managers make these decisions across such informational conditions hence the objective of this paper is twofold first we investigate whether access to a decision aid and historical information of competitors outcomes yields more or less competitive decisions and outcomes second we determine which learning constructs such as choice reinforcement and beliefs about projected profits best explain competitive actions across various information conditions we find that relative to the availability of competitive information access to a decision aid has a larger effect on lowering prices and profits we also find that in two firm markets price competition is even more intense than in five firm markets similarly the availability of market share information leads to more aggressive pricing even when profits are held constant finally we outline the implications of our findings in making managerial resource allocations to market research endeavors

a positive approach to non cooperative games abstract population steady states are defined for non cooperative games played repeatedly by individuals drawn from large populations these steady states balance the tendencies of immigration to an emigration from strategies according to certain simple measures of their relative performances approximate values for these steady states are computed for some examples and appear intuitively more plausible as descriptors of play than do nash equilibria

cournot vs walras a reappraisal through simulations abstract best reply behavior in cournot oligopolies generally leads to cournot nash equilibrium but imitative behavior selects the walrasian equilibrium as the unique stochastically stable state previous work alos ferrer 2004 showed that in the presence of memory imitative behavior leads to a non trivial dynamics selecting all quantities between the cournot and walrasian outcomes however the scope of previous results was limited to specific assumptions on demand and cost functions and did not provide information on the shape of the distribution of outcomes we use computational simulations to address these limitations we show that the selection result for non trivial memory holds beyond the set of well behaved cournot games previously analyzed further we find that in cournot games the limit distribution of long run outcomes is highly skewed towards the walrasian quantity although longer memory increases the importance of the cournot equilibrium the competitive outcome remains the dominant prediction

evolution in economic games abstract this paper examines the conditions under which evolutionary processes select equilibrium strategies of agents or firms under plausible dynamics optimal selection takes place provided that economic agents are small relative to the environment that is each such agent has a negligible effect on others payoffs however when this assumption is not met survival need not imply optimality examples in the contexts of bargaining bidding and market competition are presented

conspicuous by its absence ethics and managerial economics this paper gives prescriptions for introducing ethical concerns into the economic theory of the firm topics include social responsibility corporate governance profit maximization competition barriers collusion the market system and welfare economics the need for such prescriptions is based on a content analysis of 21 managerial economics texts for their coverage of ethics my analysis finds that substantive discussions of ethics are conspicuous by their absence as ethical breaches can involve significant monetary damages to a firm particularly through adverse market reactions moral reasoning abilities can complement analytical skills consequently my analysis demonstrates how ethics figure into the opportunity costs of managerial decision making which is central to the economic definition of profit

the evolutionary logic of honoring sunk costs i introduction economists claim that sunk costs should not figure in current decision making because by definition these expenditures cannot be retrieved and should be treated as bygones but there is a large literature both experimental and anecdotal in which people are observed to waste resources by honoring bygones that could not possibly make them better off see e g arkes and blumer 1985 arkes and ayton 1999 mcafee mialon and mialon 2010 thaler 1980 such excess in wasting resources is unlikely to have been tolerated by nature in the process of evolution if it did not serve some purpose to enhance fitness in our remote past the purpose of this study is to suggest such a function whereby evolutionary processes have hardwired a concern for sunk costs in human decision making 1 the concept of honoring sunk costs has been referred to in the literature as the concorde fallacy 2 arkes and blumer 1985 have a number of other examples of good money being thrown after bad economists have provided various explanations for why sunk costs appear salient to humans kanodia bushman and dickhaut 1989 and prendergast and stole 1996 propose a theory where reputational effects make agents unwilling to change their decisions mcafee mialon and mialon 2010 have suggested several models involving information content reputation or constraints on decision making that provide rational reasons for taking sunk costs into account likewise baliga and ely 2011 have proposed a model in which sunk costs may acquire salience as a memory kludge because they may contain information about the value of a project previously initiated but whose value has now been forgotten carmichael and macleod 2003 have proposed a model where in a bilateral bargaining situation the norm of taking account of sunk costs resolves the hold up problem that typically results in underinvestment thaler 1980 arkes and blumer 1985 and whyte 1986 suggested a prospect theory approach to understanding sunk cost effects arkes and blumer 1985 the philosopher nozick 1993 and others have argued that honoring sunk costs can alleviate problems of time inconsistency and temptation john may believe that going to the theater is a good thing but when the time comes he cannot rouse himself to do so because it would require relinquishing whatever else appears appealing at the time to circumvent this john buys tickets in advance as a precommitment device but to do this he must believe in the first place that his future self is going to honor sunk costs 3 whatever the reason for the time inconsistent preferences say hyperbolic discounting the honoring of sunk costs may be used to remedy the problem of time inconsistency but nozick for example offers no reason for why sunk costs are honored in the first place we offer an evolutionary reason to suggest why nature may have hardwired a proclivity in humans to honor sunks costs a reason that differs from those offered in the articles cited above we propose that the built in salience of sunk costs is an adaptation to the problem of self control self control problems may arise in decision making because contrary to our untutored perceptions the human brain has a triune 4 rather than a unitary structure maclean 1989 panksepp 1998 because of the way the brain has evolved different regions within it defined by their own neuroanatomical and neurochemical features deal with different aspects of action and behavior although interconnected through chemical and neuronal pathways the different control centers tend to act autonomously and may conflict in their responses to stimuli when the emotional or motivational centers which lie in the sub cortical limbic system push us to certain actions that the rational persona in the cortex wishes to deny there is a conflict and the problem of self control arises panksepp 1998 301 notes

putting on a tight leash and levelling playing field an experiment in strategic obfuscation and consumer protection the paper reports the results of an experiment where asymmetric sellers of a product can obfuscate the market we show that policy measures may have unintended effects of increasing obfuscation incentives we find that policies that limit the effectiveness of obfuscation and policies that promote parity between firms can lead less prominent firms to increase their obfuscation efforts despite this unintended effect however the former type of policies is effective in boosting consumer welfare

decentralized redistribution in a laboratory federation abstract the idea of laboratory federalism provides a strong argument in favor of fiscal decentralization it views autonomous jurisdictions in a federation as laboratories where new policies can be tested at low risk for the entire system if successful these policies will spread out by imitation otherwise they will be discarded studying this idea in a dynamic setting of fiscal competition we show that due to externalities between jurisdictions policies that appear successful and are therefore mimicked do not necessarily enhance welfare and vice versa specifically in the classical framework of decentralized rich to poor income redistribution with labor mobility the long run outcome entails a complete breakdown of redistribution with zero subsidies to the poor everywhere

evolution to equilibrium in an asymmetric oligopoly with differentiated goods abstract we present results on finite population evolutionarily stable strategies esss and stochastically stable states for a model of evolution with an imitative rule of strategy choice in an asymmetric oligopoly with differentiated goods and two groups of firms one group of low cost firms and one of high cost firms the firms play price setting and quantity setting oligopoly games under linear demand functions we will show that the stochastically stable state in a price setting oligopoly and that in a quantity setting oligopoly coincide

choosing between order of entry assumptions in empirical entry models evidence from competition between burger king and mcdonald s restaurant outlets we demonstrate how a non nested statistical test developed by vuong 1989 can be used to assess the suitability of alternate order of entry assumptions used for identification purposes in empirical entry models as an example we estimate an entry model of mcdonald s and burger king restaurant outlets in united states the data set focuses on relatively small isolated markets for these markets the non nested tests suggest that order of entry assumptions that give burger king outlets a first mover advantage are statistically preferred last a monte carlo experiment provides encouraging results suggesting that the vuong type test yields reliable results within the entry model framework

are profit maximisers the best survivors a darwinian model of economic natural selection abstract this paper demonstrates that the friedman conjecture that profit maximisation summarises appropriately the conditions for firm survival is not generally true if firms have market power profit maximisers are not necessarily the best survivors because of the possibility of spiteful behaviour of the following kind say a firm forgoes profit maximisation and thus decreases its survival chances but its deviation from maximisation harms its profit maximising competitors more than itself though the firm will be less likely to survive than it would if it maximised its profits it will still be more likely to survive than its competitors

price discrimination and equilibrium in monopolistic competition modern theories of monopolistic competition have borrowed extensively from techniques developed in location theory and the theory of spatial pricing the monopolistically competitive firm is assumed to choose a location and price for its product a subject that has been of increasing concern in this corpus of theory is that there exists no free entry price location equilibrium in this paper we demonstrate that free entry price location equilibrium exists provided only that producers are allowed to price discriminate among customers in a reasonable manner equilibrium is modelled as a two stage game using the selten concept of subgame perfect nash equilibrium it is shown that the equilibrium discriminatory price system is one initially identified by hoover in addition we show that equilibrium is not unique the precise nature of equilibrium in a particular market will be dependent upon the history of that market

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

death of the lethargic effects of expansion into new technical subfields on performance in a firm s base business this paper finds that industry incumbents that do not expand into new technical subfields tend to fare poorly in their established businesses even if the market for the established products continues to exist firms that expand from their established businesses survive longer and achieve greater subsequent market share than competitors that do not expand by some measures however a failed attempt to expand into a new subfield may be even more harmful to a base business than nonexpansion the study employs conventional and accelerated event time regression models to analyze market share and survival the sample which includes 371 incumbents in four base subfields of the medical diagnostic imaging industry between 1953 and 1989 examines performance following the emergence of five new technical subfields of the industry

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

price dispersion and accessibility a case study of fast food this study examines spatial variation in the price and accessibility of fast food across a major urban area we use novel data on the price of a representative fast food meal and the location of fast food restaurants belonging to one of three major chains in the district of columbia and its surrounding suburbs these data are used to test a structural model of spatial competition the results of this study are easily interpreted and compared with a past analysis we find that spatial differences in costs and demand conditions drive variation in the number of firms operating in a market which in turn affects prices