Heterogeneous players in a Cournot model with differentiated products
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In this article, we analyse a duopolistic Cournotian game with firms producing differentiated goods, marginal costs are constant and demand functions are microfounded. We consider firms adopting different decisional mechanisms which are based on a reduced degree of rationality. In particular, we assume that a firm adopts the local monopolistic approximation approach, while the rival adjusts its output level according to the gradient rule. We provide conditions for the stability of the Nash equilibrium and investigate some bifurcation scenarios as parameters vary. The main finding of the article is that both a high level and a low level in goods differentiation may have a destabilising role in the system.
KeywordsBifurcation Cournot game Heterogeneous players Product differentiation
JEL ClassificationL13 C62
The authors gratefully acknowledge the two anonymous reviewers for their comments and suggestions that allowed us to improve the quality of the work.
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