The selection process of firms in the evolution of industry follows a Cournot-Nash equilibrium, when firms operate in an oligopolistic market. We consider first a static symmetric framework where each of n firms operates under constant cost c and market demand is described by a stationary inverse demand curve, which is assumed to be linear for simplicity. This static model is then generalized to a noncooperative dynamic game where the firms are viewed as Cournot players, each maximizing the present discounted value of its profit stream over the horizon [0, ∞] at the constant positive rate of discount r. This frame-work naturally yields a differential game formulation, where the role of information available to each player plays a significant role. Asymmetry of the information structure can also be introduced at this stage, along with the stochastic aspects in the cost and demand structure.
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- Cournot-Nash Selection Process
Jati K. Sengupta
- Palgrave Macmillan UK
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