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Beyond myopic best response (in Cournot competition)

Fiat, Amos and Koutsoupias, Elias and Ligett, Katrina and Mansour, Yishay and Olonetsky, Svetlana (2019) Beyond myopic best response (in Cournot competition). Games and Economic Behavior, 113 . pp. 38-57. ISSN 0899-8256. https://resolver.caltech.edu/CaltechAUTHORS:20190312-141425964

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Abstract

The Nash equilibrium as a prediction myopically ignores the possibility that deviating from the equilibrium could lead to an avalanche of beneficial changes by other agents. We consider a non-myopic version of Cournot competition, where each firm selects either profit maximization (as in the classical model) or revenue maximization (by masquerading as a firm with zero production costs). We consider many non-identical firms with linear demand functions and show existence of pure Nash equilibria, that simple dynamics will produce such an equilibrium, and that some natural dynamics converge within linear time. Furthermore, we compare the outcome of the non-myopic Cournot competition with that of the standard Cournot competition. Prices in the non-myopic game are lower and the firms, in total, produce more and have a lower aggregate utility. We also briefly consider a non-myopic version of Bertrand competition, and find that prices increase relative to the classical model.


Item Type:Article
Related URLs:
URLURL TypeDescription
https://doi.org/10.1016/j.geb.2013.12.006DOIArticle
http://resolver.caltech.edu/CaltechAUTHORS:20120615-115818156Related ItemConference Paper
ORCID:
AuthorORCID
Ligett, Katrina0000-0003-2780-6656
Additional Information:© 2013 Elsevier Inc. Received 2 May 2012, Available online 30 December 2013. An earlier extended abstract appeared in SODA 2012. This research was supported in part by the Google Inter-university center for Electronic Markets and Auctions and in part by a grant from the Israeli Science Foundation, and in part by The Israeli Centers of Research Excellence (I-CORE) program (Center No. 4/11). This research was supported in part by the European Union's Seventh Framework Programme FP7 / grant 284731 (UaESMC), by the ERC advanced grant No. 321171 (ALGAME), and by the ESF-NSRF research program Thales (AGT). Research performed in part while a postdoctoral associate at Cornell University and while visiting the Hebrew University. Research supported in part by an NSF Mathematical Sciences Postdoctoral Fellowship (NSF Award DMS-1004416), NSF grants CCF-0910940 and CNS-1254169, the Charles Lee Powell Foundation, and a Microsoft Faculty Fellowship. This research was supported in part by the Google Inter-university center for Electronic Markets and Auctions, The Israeli Centers of Research Excellence (I-CORE) program (Center No. 4/11), by a grant from The Israeli Science Foundation, by a grant from United States–Israel Binational Science Foundation (BSF), and by a grant from the Israeli Ministry of Science (MoS). We are very grateful to Andrzej (Andy) Skrzypacz who very kindly helped us overcome our ignorance and gave us critical references regarding strategic delegation.
Funders:
Funding AgencyGrant Number
GoogleUNSPECIFIED
Israel Science FoundationUNSPECIFIED
Israeli Centers for Research Excellence (I-CORE)4/11
European Research Council (ERC)284731
European Research Council (ERC)321171
European Social FundUNSPECIFIED
Hebrew UniversityUNSPECIFIED
NSFDMS-1004416
NSFCCF-0910940
NSFCNS-1254169
Charles Lee Powell FoundationUNSPECIFIED
Microsoft Faculty FellowshipUNSPECIFIED
Binational Science Foundation (USA-Israel)UNSPECIFIED
Ministry of Science (Israel)UNSPECIFIED
Subject Keywords:Cournot competition; Bertrand competition; Delegation games; Dynamics
Classification Code:JEL: C72; D40
Record Number:CaltechAUTHORS:20190312-141425964
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20190312-141425964
Official Citation:Amos Fiat, Elias Koutsoupias, Katrina Ligett, Yishay Mansour, Svetlana Olonetsky, Beyond myopic best response (in Cournot competition), Games and Economic Behavior, Volume 113, 2019, Pages 38-57, ISSN 0899-8256, https://doi.org/10.1016/j.geb.2013.12.006. (http://www.sciencedirect.com/science/article/pii/S0899825613001723)
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:93741
Collection:CaltechAUTHORS
Deposited By: Tony Diaz
Deposited On:12 Mar 2019 21:26
Last Modified:03 Oct 2019 20:57

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