Analysis of consistent equilibria in a mixed duopoly

Vyacheslav V. Kalashnikov, Vladimir A. Bulavsky, Nataliya I. Kalashnykova, Junzo Watada, Diego De Jesús Hernández-Rodríguez

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    Abstract

    This paper examines a model of a mixed duopoly with conjectural variations equilibrium (CVE), in which one of the agents maximizes a convex combination of his/her net profit and domestic social surplus. The agents' conjectures concern the price variations, which depend on their production output variations. Based on the already established existence and uniqueness results for the CVE (called the exterior equilibrium) for any set of feasible conjectures, the notion of interior equilibrium is introduced by developing a consistency criterion for the conjectures (referred to as influence coefficients), and the existence theorem for the interior equilibrium (understood as a CVE state with consistent conjectures ) is proven. When the convex combination coefficient tends to 1, thus transforming the model into the mixed duopoly in its extreme form, two trends are apparent. First, for the private company, the equilibrium with consistent conjectures becomes more proficient than the Cournot-Nash equilibrium. Second, there exists a (unique) value of the combination coefficient such that the private agent's profit is the same in both of the above-mentioned equilibria, which makes subsidies to the producer or to consumers unnecessary.

    Original languageEnglish
    Pages (from-to)962-970
    Number of pages9
    JournalJournal of Advanced Computational Intelligence and Intelligent Informatics
    Volume18
    Issue number6
    Publication statusPublished - 2014 Nov 1

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    Keywords

    • Equilibrium theory
    • Game theory
    • Management engineering

    ASJC Scopus subject areas

    • Artificial Intelligence
    • Computer Vision and Pattern Recognition
    • Human-Computer Interaction

    Cite this

    Kalashnikov, V. V., Bulavsky, V. A., Kalashnykova, N. I., Watada, J., & Hernández-Rodríguez, D. D. J. (2014). Analysis of consistent equilibria in a mixed duopoly. Journal of Advanced Computational Intelligence and Intelligent Informatics, 18(6), 962-970.