Dynamics of Oligopoly Model

Abstract

In this thesis, our aim is to study a Cournot tatonnement system which exhibits destabilisation of the Cournot equilibrium as the number of firms increase. Our approach is to first consider the special case of firms behaving identically in a market share attraction model in two different adjustment process: Cournot tatonnement and bounded rationality adjustment. Results from the Cournot tatonnement system shows a superstable equilibrium in two firms model and an unstable equilibrium in a five firms model. In the five firms model, we show that introducing heterogeneity stabilises the Cournot equilibrium. For both two and five firms model, the differences of costs between firms are critical for the convergence of the system to the Cournot equilibrium. Lastly, we study the effect of entries and exits of firms on the number of active firms in the market. We discover that the market can sustain between two to four firms, and the factors are differences of costs and initial outputs between firms, and barriers to entries.

Date of Award	1 Aug 2012
Original language	English
Awarding Institution	The University of Manchester
Supervisor	Paul Glendinning (Supervisor) & David Broomhead (Supervisor)