Stability analysis in a Cournot duopoly with managerial sales delegation and bounded rationality

Fanti, Luciano and Gori, Luca (2011): Stability analysis in a Cournot duopoly with managerial sales delegation and bounded rationality.

Abstract

The present study analyses the dynamics of a Cournot duopoly with managerial sales delegation and bounded rational players. We find that when firms’ owners hire a manager and delegate the output decisions to him, the unique Cournot-Nash equilibrium is more likely to be destabilised (through a flip bifurcation) than when firms maximise profits. Moreover, highly periodicity and deterministic chaos can also occur as the managers’ bonus increases.

• Item Type: MPRA Paper
• Language: English
• Keywords: Bifurcation; Chaos; Cournot; Duopoly; Managerial incentive contracts
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C62 - Existence and Stability Conditions of Equilibrium

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