Cournot Competition, Organization and Learning

Ray Barrell (1) , Francesco Saraceno (2)

1 NIESR - Research Centre of the National Institute of Economic and Social Research
2 OFCE - Observatoire français des conjonctures économiques (Sciences Po)

We model firms’ output decisions in a repeated duopoly frameworkfocusing on three interrelated issues: (1) the role of learningin the adjustment process toward equilibrium, (2) the role of organizationalstructure in the firm’s decision making, and (3) the role ofchanging environmental conditions on learning and output decisions.We characterize the firm as a type of artificial neural network, whichmust estimate its optimal output decision based on signals it receivesfrom the economic environment (which influences the demand function).Via simulation analysis we show: (1) how organizations learn toestimate the optimal output over time as a function of the environmentaldynamics; (2) which networks are optimal for each environmentalcomplexity, and (3) the equilibrium industry structure.

Mots clés: Cournot Competition; Neural Networks; Firm learning

Domaines: Economies et finances

Ray Barrell, Francesco Saraceno. Cournot Competition, Organization and Learning. Journal of Economic Dynamics and Control, 2005, 29 (1-2), pp.277 - 295. ⟨10.1016/j.jedc.2003.07.003⟩. ⟨hal-03597732⟩