Abstract
The dynamic model of price competition in which processes of strategic interaction between companies on an imperfect competition market are described with the game-theoretic approach and methods of nonlinear dynamics. The pricing dynamics for the companies is modeled with difference equations (mappings). We study the stability of the fixed point of the price mapping. Results of our numerical modeling have shown the existence of periodic and chaotic solutions in the price competition model. We present intra-company adaptation mechanisms based on changing the prices in a way proportional to the rate of change in the companies’ profits; this lets us reduce the prices to a local Nash equilibrium and stabilize the chaotic dynamics of the market.
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Original Russian Text © E.V. Orlova, 2017, published in Avtomatika i Telemekhanika, 2017, No. 1, pp. 19–34.
This paper was recommended for publication by A.L. Fradkov, a member of the Editorial Board
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Orlova, E.V. Control over chaotic price dynamics in a price competition model. Autom Remote Control 78, 16–28 (2017). https://doi.org/10.1134/S0005117917010027
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DOI: https://doi.org/10.1134/S0005117917010027