Long run equilibria in an asymmetric oligopoly
Yasuhito Tanaka ^{A1}
^{A1} Faculty
of Law, Chuo University, 7421, Higashinakano, Hachioji, Tokyo, 19203,
JAPAN (email: yasuhito@tamacc.chuou.ac.jp)
Abstract:
Summary. Consider an oligopolistic industry composed of two groups (or
populations) of firms, the low cost firms and the high cost firms. The
firms produce a homogeneous good. I study the finite population
evolutionarily stable strategy defined by Schaffer (1988), and the long
run equilibrium in the stochastic evolutionary dynamics based on
imitation and experimentation of strategies by firms in each group. I
will show the following results. 1) The finite population
evolutionarily stable strategy (ESS) output is equal to the competitive
(or Walrasian) output in each group of the firms. 2) Under the
assumption that the marginal cost is increasing, the ESS state is the
long run equilibrium in the stochastic evolutionary dynamics in the
limit as the output grid step, which will be defined in the paper,
approaches to zero.
Keywords:
Keywords and Phrases: Asymmetric oligopoly, Finite population evolutionarily stable strategy, Long run equilibrium.
