Oligopolistic Economies as Games of Limited Information: Description of Equilibria

Abstract

In this chapter we consider a class of oligopolistic economies (games) in which each firm has a technology with nondecreasing returns to scale and has less than full information about the economy’s structure and current state. We describe a state of such an economy wherein (1) each firm does not want to change his action since, given his observations and his general knowledge of the economy, he finds that if he did change, then credible responses of other firms would make him regret doing so; and (2) markets are cleared so that the firms’ actions are, in fact, mutually consistent and feasible. In the following chapter we study the existence of such an economic state.