A Dynamic Model of Cournot Competition for an Oligopolistic Market
Open Access
- 27 February 2021
- journal article
- research article
- Published by MDPI AG in Mathematics
- Vol. 9 (5), 489
- https://doi.org/10.3390/math9050489
Abstract
This paper studies firms’ dynamic interaction in a Cournot market. In each period of the game, the firm decides whether to make a stochastic positioning investment (establishing or maintaining its position in market competition). The market demand is also stochastic (high or low). By adopting symmetric Market perfect Nash equilibrium, firms choose strategies to maximize the discounted present value of cash flow. By considering the cases with one, two, and three active firms in the market, respectively, we present the stage game market outcome, show the transition probabilities, find the steady state of the system, and discuss the speed of convergence. Our work allows for two types of uncertainty in firms’ interactions, which contribute to the dynamic oligopoly literature.Keywords
Funding Information
- Fundamental Research Funds for the Central Universities Universities (2020JJ029, G2020202002, 18BJL109)
- The National Natural Science Foundation of China (71873074, 72073080)
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