The complexion of dynamic duopoly game with horizontal differentiated products |
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| Affiliation: | 1. Center for Quantitative Economics, Jilin University, Changchun, Jilin 130012, PR China;2. School of Business, Jilin University, Changchun, Jilin 130012, PR China;1. Université Paul Valéry Montpellier, Route de Mende, Montpellier 34199, France;2. Zenith Team from INRIA at LIRMM, 860 rue de St Priest, Montpellier 34095, France;3. ADVANSE Team at LIRMM, France;4. Twin Solutions, 11, rue Dulong, Paris 75017, France |
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| Abstract: | In this paper, firms are considered on the hypothesis of having incomplete rationality expectation and incomplete information of the market to get the dynamic development of price competition behavior in the Hotelling model (Hotelling, 1929). Under the assumption of the heterogeneous expectations of two firms, we have observed that the Nash equilibrium price can be a dynamic equilibrium to realize when the speed of price adjustment is lower. However, the numerical simulation shows that the system may present a periodic and chaotic status when the speed of price adjustment is higher. The effect of the degree of horizontal differentiation on the stability of Nash equilibrium of the system is also discussed. We have a different conclusion from Lucino Fanti and Luca Gori's (2012); that is the greater the degree of product horizontal differentiation is, the more stable the Nash equilibrium of the system is. |
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