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| Author: | Rhode, P. Stegeman, M. |
| Title: | Non-Nash equilibria of Darwinian dynamics with applications to duopoly |
| Journal: | International Journal of Industrial Organization
2001 : MAR, VOL. 19:3-4, p. 415-453 |
| Index terms: | DUOPOLY EVOLUTIONARY ECONOMICS REVENUE |
| Language: | eng |
| Abstract: | Consider a symmetric, differentiated duopoly. If firms' strategy choices, in the repeated game, follow a stochastic Darwinian process, then they cluster around a strategy profile that is typically not a one-shot Nash equilibrium. This profile is invariant under a broad class of transformations of the strategy space (e.g. Bertrand vs. Cournot); this implies that mixing imitative and rational decision-makers can produce purely imitative outcomes. The evolution of objectives consistently distorts behaviour toward revenue maximization, and the distortion increases in 'good times' of high demand and low costs. The authors generalize the results beyond duopoly to symmetric, two- player games. |
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