The Propagation of Cooperation in a Spatial Model of Learning with Endogenous Aspirations

In this paper we build a spatial, aspiration-based model of learning in the context of a quantity setting oligopoly from which we want to explore the conditions that lead to the emergence of cooperation among firms. We consider an economy consisting of many identical duopoliesj each duopoly is placed on a square of a torus. The duopolists are boundedly rational agents which adopt a very simple behavioural rule: if they are earning at least average profits, they do not change their strategies; if they are earning below-average profits they imitate the strategy adopted by one of their neighbours. We consider many variations to this general setting and, in most of the cases, we get results that support cooperation among firms.