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The nonparametric approach to evolutionary oligopoly

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  • Moghadam, Hamed M.

Abstract

A recent paper of Carvajal, Deb, Fenske, and Quah (Econometrica 2013) applies the revealed preference approach in the context of a quantity competition oligopoly game. This paper aims to present a different solution concept for an evolutionary model in the asymmetric oligopoly setup where firms have different cost functions to produce a homogenous good. Then, using the approach introduced by Carvajal et al. (2013), we derive the testable conditions of the evolutionary oligopoly model. Therefore, contrary to the typical empirical literature in IO, without making any parametric assumption regarding to the demand curve and the cost function, this nonparametric approach characterizes a set of conditions (restrictions) on observational dataset to be consistent with evolutionary oligopoly model. An empirical application to the oil market with OPEC producers and Non-OPEC producers is presented and we compare the rejection rates of both Cournot and evolutionary hypotheses.

Suggested Citation

  • Moghadam, Hamed M., 2015. "The nonparametric approach to evolutionary oligopoly," Ruhr Economic Papers 576, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    • Handle: RePEc:zbw:rwirep:576
    DOI: 10.4419/86788665
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    References listed on IDEAS

    as
    1. Cherchye, Laurens & Demuynck, Thomas & De Rock, Bram, 2013. "The empirical content of Cournot competition," Journal of Economic Theory, Elsevier, vol. 148(4), pages 1552-1581.
    2. Andrés Carvajal & Rahul Deb & James Fenske & John Quah, 2014. "A nonparametric analysis of multi-product oligopolies," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 57(2), pages 253-277, October.
    3. Hanoch, Giora & Rothschild, Michael, 1972. "Testing the Assumptions of Production Theory: A Nonparametric Approach," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 256-275, March-Apr.
    4. Apesteguia, Jose & Huck, Steffen & Oechssler, Jörg & Weidenholzer, Simon, 2010. "Imitation and the evolution of Walrasian behavior: Theoretically fragile but behaviorally robust," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1603-1617, September.
    5. Andrés Carvajal & Rahul Deb & James Fenske & John K.‐H. Quah, 2013. "Revealed Preference Tests of the Cournot Model," Econometrica, Econometric Society, vol. 81(6), pages 2351-2379, November.
    6. Cherchye, Laurens & Demuynck, Thomas & De Rock, Bram, 2013. "The empirical content of Cournot competition," Journal of Economic Theory, Elsevier, vol. 148(4), pages 1552-1581.
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    More about this item

    Keywords

    evolutionary oligopoly; observable restrictions; non-parametric test; oil market;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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