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| | ONLINE | ISSN | : | 1880-6465 | | PRINT | ISSN | : | 0287-6256 |
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| | Studies in Regional Science |
| Vol. 35 (2005) , No. 1 pp.1-16 |
| [PDF (247K)] [References]  |
 | Profitable Chaos in a Duopoly Market with Asymmetric Production Externality
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| | 1) Department of Economics, Chuo University
2) Department of Economics, Kanto Gakuin University |
| Abstract
This study investigates an economic implication of chaotic fluctuations that are observed in a nonlinear economic dynamic model. To this end, it constructs a nonlinear discrete time Cournot duopoly model in which firms have U-shaped or inverted U-shaped reaction functions due to production externality and shows that chaotic output fluctuations can arise for strong nonlinearities. Two main results of this study are: (i) it is theoretically as well as numerically confirmed that one of the duopolists can benefit in the sense that the long-run average profit taken along a chaotic trajectory is higher than the profit taken at an equilibrium point while the other is disadvantaged if both duopolists are homogeneous; (ii) it is verified with numerical simulations that both duopolists can benefit from chaotic trajectories if they are heterogenous. |
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| To cite this article: | | Akio MATSUMOTO and Yasuo NONAKA, “Profitable Chaos in a Duopoly Market with Asymmetric Production Externality”, Studies in Regional Science, Vol. 35, No. 1, 2005, pp1-16 . | |
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| doi:10.2457/srs.35.1 | | JOI JST.JSTAGE/srs/35.1 |
| Copyright (c) 2007 by The Japan Section of the Regional Science Association International |
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