Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/22850
Authors: 
Schipper, Burkhard C.
Year of Publication: 
2002
Series/Report no.: 
Bonn econ discussion papers 2002,29
Abstract: 
We present a formal model of symmetric n-firm Cournot oligopoly with a heterogeneous population of profit optimizers and imitators. Imitators mimic the output decision of the most successful firms of the previous round a la Vega-Redondo (1997). Optimizers play myopic best response to the opponents' previous output. The dynamics of the decision rules induce a Markov chain. As expression of bounded rationality, firms are allowed to make mistakes and deviate from the decision rules with a small probability. Applying stochastic stability analysis, we characterize the long run behavior of the oligopoly. We find that the long run distribution converges to a recurrent set of states in which imitators are better off than 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 fundamental conjecture by Friedman (1953).
Subjects: 
imitation
myopic best reply
bounded rationality
profit maximization hypothesis
stochastic stability
learning
Stackelberg
JEL: 
D21
C72
D43
L13
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.