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Stability in a general oligopoly model
Author(s) -
Federgruen Awi,
Hu Ming
Publication year - 2019
Publication title -
naval research logistics (nrl)
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.665
H-Index - 68
eISSN - 1520-6750
pISSN - 0894-069X
DOI - 10.1002/nav.21829
Subject(s) - oligopoly , monotonic function , affine transformation , operator (biology) , mathematical economics , competitor analysis , economics , piecewise , nash equilibrium , stability (learning theory) , convergence (economics) , mathematics , cournot competition , computer science , mathematical analysis , biochemistry , chemistry , management , repressor , machine learning , transcription factor , pure mathematics , gene , economic growth
We analyze a general but parsimonious price competition model for an oligopoly in which each firm offers any number of products. The demand volumes are general piecewise affine functions of the full price vector, generated as the “regular” extension of a base set of affine functions. The model specifies a product assortment , along with their prices and demand volumes, in contrast to most commonly used demand models. We identify a fully best response operator which is monotonically increasing so that the market converges to a Nash equilibrium, when firms dynamically adjust their prices, as best responses to their competitors' prices, at least when starting in one of two price regions. Moreover, geometrically fast convergence to a common equilibrium can be guaranteed for an arbitrary starting point, under an additional condition for the price sensitivity matrix.