Stability of the Cournot process–experimental evidence
International Journal of Game Theory, 2002•Springer
We report results of experiments designed to test the predictions of the best-reply process. In
a Cournot oligopoly with four firms, the best-reply process should theoretically explode if
demand and cost functions are linear. We find, however, no experimental evidence of such
instability. Moreover, we find no differences between a market which theoretically should not
converge to Nash equilibrium and one which should converge because of inertia. We
investigate the power of several learning dynamics to explain this unpredicted stability.
a Cournot oligopoly with four firms, the best-reply process should theoretically explode if
demand and cost functions are linear. We find, however, no experimental evidence of such
instability. Moreover, we find no differences between a market which theoretically should not
converge to Nash equilibrium and one which should converge because of inertia. We
investigate the power of several learning dynamics to explain this unpredicted stability.
Abstract
We report results of experiments designed to test the predictions of the best-reply process. In a Cournot oligopoly with four firms, the best-reply process should theoretically explode if demand and cost functions are linear. We find, however, no experimental evidence of such instability. Moreover, we find no differences between a market which theoretically should not converge to Nash equilibrium and one which should converge because of inertia. We investigate the power of several learning dynamics to explain this unpredicted stability.
Springer
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