No Regret Learning in Oligopolies: Cournot vs. Bertrand

نویسندگان

  • Uri Nadav
  • Georgios Piliouras
چکیده

Cournot and Bertrand oligopolies constitute the two most prevalent models of firm competition. The analysis of Nash equilibria in each model reveals a unique prediction about the stable state of the system. Quite alarmingly, despite the similarities of the two models, their projections expose a stark dichotomy. Under the Cournot model, where firms compete by strategically managing their output quantity, firms enjoy positive profits as the resulting market prices exceed that of the marginal costs. On the contrary, the Bertrand model, in which firms compete on price, predicts that a duopoly is enough to push prices down to the marginal cost level. This suggestion that duopoly will result in perfect competition, is commonly referred to in the economics literature as the “Bertrand paradox”. In this paper, we move away from the safe haven of Nash equilibria as we analyze these models in disequilibrium under minimal behavioral hypotheses. Specifically, we assume that firms adapt their strategies over time, so that in hindsight their average payoffs are not exceeded by any single deviating strategy. Given this no-regret guarantee, we show that in the case of Cournot oligopolies, the unique Nash equilibrium fully captures the emergent behavior. Notably, we prove that under natural assumptions the daily market characteristics converge to the unique Nash. In contrast, in the case of Bertrand oligopolies, a wide range of positive average payoff profiles can be sustained. Hence, under the assumption that firms have no-regret the Bertrand paradox is resolved and both models arrive to the same conclusion that increased competition is necessary in order to achieve perfect pricing. Department of Computer Science, Stanford University, Stanford CA 94305. E-mail: [email protected]. Department of Computer Science, Cornell University, Ithaca NY 14853. Supported by NSF grant CCF-0325453. E-mail: [email protected].

برای دانلود متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید

ثبت نام

اگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید

منابع مشابه

On the COalitiOnal Stability Of MOnOpOly pOwer in DifferentiateD bertranD anD COurnOt OligOpOlieS Documents de travail GREDEG GREDEG Working Papers Series

In this article we revisit the classic comparison between Bertrand and Cournot competition in the presence of a cartel of firms that faces outsiders acting individually. This competition setting enables to deal with both non-cooperative and cooperative oligopoly games. We concentrate on industries consisting of symmetrically differentiated products where firms operate at a constant and identica...

متن کامل

Dynamic Bertrand and Cournot competition: Asymptotic and computational analysis of product differentiation

We study continuous time oligopolies in which a small number of firms producing similar goods compete with one another by setting prices or quantities. We study a deterministic version of the problem using an asymptotic expansion of the relevant HJB partial differential equations. We find in this setting that for firms with highly differentiated goods, the type of competition matters little. Fo...

متن کامل

Oligopoly Games under Asymmetric Costs and an Application to Energy Production

Oligopolies in which firms have different costs of production have been relatively understudied. In contrast to models with symmetric costs, some firms may be inactive in equilibrium. (With symmetric costs, the results trivialize to all firms active or all firms inactive.) We concentrate on the linear demand structure with constant marginal but asymmetric costs. In static one-period models, we ...

متن کامل

Strategic Commitment and Cooperation in Experimental Games of Strategic Complements and Substitutes *

We study the impact of strategic commitment on cooperation in indefinitely repeated games of strategic substitutes (Cournot) and complements (Bertrand) using laboratory experiments. Overall, strategic commitment has no effect on cooperation with strategic substitutes and a negative one with strategic complements. In the absence of strong strategic commitment, we find more cooperation in the com...

متن کامل

Cournot versus Walras in Dynamic Oligopolies with Memory

This paper explores the impact of memory in Cournot oligopolies where firms learn through imitation of success as suggested in Alchian (1950) and modeled in Vega-Redondo (1997). As long as memory includes at least one period, the long-run outcome corresponds to any quantity between the Cournot one and the Walras one. The (evolutionary) stability of the walrasian outcome relies on inter-firm com...

متن کامل

ذخیره در منابع من


  با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید

برای دانلود متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید

ثبت نام

اگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید

عنوان ژورنال:

دوره   شماره 

صفحات  -

تاریخ انتشار 2010