Evolutionary competition between boundedly rational behavioral rules in oligopoly games

Abstract

In this paper, we propose an evolutionary model of oligopoly competition where agents can select between different behavioral rules to make decisions on productions. We formalize the model as a general class of evolutionary oligopoly games and then we consider an example with two specific rules, namely Local Monopolistic Approximation and Gradient dynamics. We provide several results on the global dynamic properties of the model, showing that in some cases the attractor of the system may belong to an invariant plane where only one behavioral rule is adopted (monomorphic state). The attractors on the invariant planes can be either strong attractors or weak attractors. However, we also explain why the system can be in a state of Evolutionary Stable Heterogeneity, where it is more profitable for the agents to employ both heuristics in the long term (polymorphic state)