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2012 | 121 | 2B | B-50-B-53
Article title

Stability of the Cournot-Nash Equilibrium in Standard Oligopoly

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EN
Abstracts
EN
The 19c. physics is a cognitive archetype of contemporary economics, where static, linear, closed systems that head for thermodynamic equilibrium were of great importance. In this standard of scientific knowledge were included selfish aspirations of agents, which served to prove stability of market equilibrium. The strive of entrepreneurs after profit maximization brings economic systems to a stable Cournot-Nash state of equilibrium, which is determined by the point of crossing of reaction curves. This type of reasoning still sets standards for education of microeconomics. Meanwhile, numerical explorations of simple, standard, nonlinear models of oligopoly prove that Cournot-Nash points are stable only over shortest periods. These are periods in which variables are changing (production values), and parameters (marginal costs) remain constant. According to a convention adopted in economics, in short periods various kinds of costs can change, including marginal costs. The only unchanging category in these periods are fixed costs. The postulate of profit maximization induces entrepreneurs to lower marginal costs. It provokes drifting of markets along short-term equilibrium states towards states of higher complexity. States far from equilibrium are natural market states. It contradicts the basics of traditional microeconomics. Selfish aspirations of agents do not guarantee stability of market equilibrium.
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Contributors
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  • Department of Quantitative Methods, Faculty of Economic Sciences, University of Warmia and Mazury, M. Oczapowskiego 4,PL-10-719 Olsztyn, Poland
References
  • [1] A. Cournot, Mathematical Principles of the Theory of Wealth, James & Gordon, San Diego 1995
  • [2] J. Nash, Annals of Mathematics 54, 286 (1951)
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  • [4] A. Jakimowicz, Źródła niestabilności struktur rynkowych, seria: Współczesna Ekonomia, Wydawnictwo Naukowe PWN, Warszawa 2010
  • [5] T. Puu, Chaos, Solitons, and Fractals 1, 573 (1991)
  • [6] T. Puu, Nonlinear Economic Dynamics, Springer-Verlag, Berlin 1997
  • [7] T. Puu, Attractors, Bifurcations, and Chaos. Nonlinear Phenomena in Economics, Springer-Verlag, Berlin 2000
  • [8] J. S. Cánovas, D. L. Medina, Discrete Dynamics in Nature and Society 2010 (2010)
  • [9] T. Puu, Chaos, Solitons, and Fractals 7, 2075 (1996)
  • [10] A. Agliari, L. Gardini, T. Puu, Chaos, Solitons and Fractals 11, 2531 (2000)
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Publication order reference
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bwmeta1.element.bwnjournal-article-appv121n2ba121z2bp10kz
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