Computational Economics

, Volume 42, Issue 4, pp 373–391 | Cite as

An Evolutionary Model of Price Competition Among Spatially Distributed Firms

  • Ludo Waltman
  • Nees Jan van Eck
  • Rommert Dekker
  • Uzay Kaymak
Article

Abstract

Various studies have shown the emergence of cooperative behavior in evolutionary models with repeated local interaction among spatially distributed agents. We investigate to what extent these findings generalize to evolutionary models of price competition among spatially distributed firms. We consider both one- and two-dimensional models, and we vary the amount of information firms have about competitors in their neighborhood. Our computer simulations show that the emergence of cooperative behavior depends strongly on the amount of information available to firms. Firms tend to behave most cooperatively if they have only a very limited amount of information about their competitors. We provide an intuitive explanation for this phenomenon. Our simulations further indicate that three other factors in our models, namely the accuracy of firms’ information, the probability of experimentation, and the spatial distribution of consumers, have little effect on the emergence of cooperative behavior.

Keywords

Cooperation Evolutionary model Price competition  Simulation Spatial model 

Notes

Acknowledgments

We would like to thank Cornelis van Bochove for his comments on an earlier draft of this paper. The paper has also benefited from the comments of an anonymous referee.

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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  • Ludo Waltman
    • 2
    • 1
  • Nees Jan van Eck
    • 1
    • 2
  • Rommert Dekker
    • 2
  • Uzay Kaymak
    • 2
    • 3
  1. 1.Centre for Science and Technology StudiesLeiden UniversityLeidenThe Netherlands
  2. 2.Econometric Institute, Erasmus School of EconomicsErasmus University RotterdamRotterdamThe Netherlands
  3. 3.Industrial Engineering & Innovation SciencesEindhoven University of TechnologyEindhovenThe Netherlands

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