Presenting a model to determine the equilibrium point in the Oligopoly

Presenting a model to determine the equilibrium point in the Oligopoly

Subject Areas :

Reza Basiri ¹ , Mansour Abedian ^{2 *} , Saeed Aghasi ³ , Zahra Dashtlali ⁴

1 - Doctoral student of Management Department, Dahaghan Branch, Islamic Azad University, Dahaghan, Iran.
2 - Assistant Professor, Department of Industrial Engineering, Najaf Abad Branch, Islamic Azad University, Najaf Abad, Iran. (author responsible)
3 - Assistant Professor, Department of Management, Dehagan Branch, Islamic Azad University, Dehagan, Iran.
4 - Assistant Professor, Department of Management, Dehagan Branch, Islamic Azad University, Dehagan, Iran.

Received: 2023-10-24 Accepted : 2024-03-04 Published : 2024-12-29

Keywords: Price-taking, Cournot equilibrium, Price-setting, Oligopoly.,

Abstract :

Objective:The aim of this research is to use game theory models to analyze and examine the strategies of price-taking and price-setting in oligopolistic markets. In this study, companies are able to select the price-taking behavior through trial and error, following their previous profitability pattern, or adopt a price-setting strategy by analyzing market structure and competitor behaviors.

Research Methodology:This study combines game theory with analytical tools, incorporating forward-looking equilibrium concepts and the use of MATLAB software to solve and analyze the equations of game theory. The research examines the behavior of companies in oligopolistic markets, considering aspects of learning, adaptive behavior, and dynamics of companies in real-world conditions.

Findings: The results of the study show that the stability of the market depends on various factors such as social learning, rationality of firms, and the memory size of the firms. The Cournot model is identified as one of the stable markets, whereas a market where all firms solely accept prices based on individual learning will never be stable.

Originality / Scientific Value Added: This research contributes to the expanding economic literature dealing with behavioral monopolies. Unlike classical models that consider a fixed equilibrium point, this study emphasizes the dynamic aspects of learning and adaptation in company behavior in real-world markets. The paper also demonstrates that Cournot equilibrium is applicable to dynamic and complex oligopolistic market models.

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