Cournot Competition, Organization and Learning∗

We model firms’ output decisions in a repeated duopoly framework focussing on three interrelated issues: 1) the role of learning in the adjustment process toward equilibrium, 2) the role of organizational structure in organizational decision making, and 3) the role of changing environmental conditions on learning and output decisions. We model the firm as a type of artificial neural network, which must estimate its optimal output decision based on signals it receives from the economic environment (which influence the demand function). Via simulation analysis we show: 1) How organizations learn to estimate optimal output over time as a function of the environmental dynamics; 2) which networks are optimal given the environmental dynamics; and 3) What is the equilibrium industry structure.