Imitators and Optimizers in Symmetric n-Firm Cournot Oligopoly

I present a formal model of symmetric n-firm Cournot oligopoly. Instead of assuming a homogeneous population of profit maximizing firms, the set of firms is divided into two subpopulations of either imitators or optimizers. Imitators mimic the output decision of the most successful firms of the previous round. Optimizers are myopic best response players to the previous market output. The dynamics of the decision rules induces a Markov chain. As expression of bounded rationality, firms are allowed to make mistakes and deviate from the decision rules by a small probability. I apply stochastic stability analysis (Kandori/Rob/Mailath, 1993, Young, 1993) to characterize the long run behavior of the oligopoly. It is known that under certain stability conditions a homogeneous population of optimizers converges to Cournot Nash equilibrium. Vega-Redondo (1997) showed that a homogeneous population of imitators converges to competitive solution. I find that a heterogeneous population converges to a single-mutation connected absorbing set of states where imitators are better off than optimizers. This outcome provides some similarity to Stackelberg behavior whereby imitators take here the role of ”independent” firms and optimizers are ”dependent”. JEL-Classifications: C72, D21, D43, L13