Cournot Competition, Organization and Learning
Abstract
We model firms’ output decisions in a repeated duopoly framework
focusing on three interrelated issues: (1) the role of learning
in the adjustment process toward equilibrium, (2) the role of organizational
structure in the firm’s decision making, and (3) the role of
changing environmental conditions on learning and output decisions.
We characterize the firm as a type of artificial neural network, which
must estimate its optimal output decision based on signals it receives
from the economic environment (which influences the demand function).
Via simulation analysis we show: (1) how organizations learn to
estimate the optimal output over time as a function of the environmental
dynamics; (2) which networks are optimal for each environmental
complexity, and (3) the equilibrium industry structure.