Nonlinear dynamics in a Cournot duopoly with isoelastic demand

This paper analyses the dynamics of a nonlinear Cournot duopoly with general isoelastic demand (quasi-linear preferences) and quantity-setting firms that have incomplete information about the market demand. Unlike existing papers, we propose a model where the price elasticity of demand is different from one. This causes interesting local and global dynamic events that cannot be observed in the case of unit-elastic demand and homogeneous players. In particular, the global behaviour of the map is studied through the critical curves technique, and numerical simulations show coexistence of attractors, coordination failures and complex structures of the basins of attraction. © 2013 IMACS. Published by Elsevier B.V. All rights reserved. JEL classification: C62; D43; L13