Theoretical Economics Letters
Volume 3, Issue 1 (February 2013)
ISSN Print: 2162-2078 ISSN Online: 2162-2086
Google-based Impact Factor: 1.19 Citations h5-index & Ranking
Evolutionarily Stable Conjectures and Social Optimality in Oligopolies ()
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ABSTRACT
Following the evolutionary game-theoretic approach to analyze Conjectural Variations (CV) in oligopolies, a model is developed to derive the Evolutionarily Stable Strategies (ESS) for quantity-setting and price-setting oligopolies with CV, producing heterogeneous goods. It is shown that ESS coincides with the Consistent CV in the oligopoly model. Earlier studies have demonstrated the above result only for duopolies. It is also shown that the market outcome induced by ESS is socially suboptimal if firms produce heterogeneous products, but can be socially optimal if firms produce homogeneous goods. In general, the market outcome approaches the socially optimal outcome, as the number of firms increases to infinity.
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