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Economic Theory
Publisher: Springer-Verlag GmbH
ISSN: 0938-2259 (Paper) 1432-0479 (Online)
Issue: Volume 14, Number 3
Date:  November 1999
Pages: 705 - 715
Long run equilibria in an asymmetric oligopoly

Yasuhito Tanaka A1

A1 Faculty of Law, Chuo University, 742-1, Higashinakano, Hachioji, Tokyo, 192-03, JAPAN (e-mail: yasuhito@tamacc.chuo-u.ac.jp)


Summary. Consider an oligopolistic industry composed of two groups (or populations) of firms, the low cost firms and the high cost firms. The firms produce a homogeneous good. I study the finite population evolutionarily stable strategy defined by Schaffer (1988), and the long run equilibrium in the stochastic evolutionary dynamics based on imitation and experimentation of strategies by firms in each group. I will show the following results. 1) The finite population evolutionarily stable strategy (ESS) output is equal to the competitive (or Walrasian) output in each group of the firms. 2) Under the assumption that the marginal cost is increasing, the ESS state is the long run equilibrium in the stochastic evolutionary dynamics in the limit as the output grid step, which will be defined in the paper, approaches to zero.


Keywords and Phrases: Asymmetric oligopoly, Finite population evolutionarily stable strategy, Long run equilibrium.

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