Cournot vs. Walras in Dynamic Oligopolies with Memory

Carlos Alós-Ferrer, University of Konstanz

Abstract

This paper explores the impact of memory in Cournot oligopolies where firms learn through imitation of success (as suggested in Alchian (1950) and modeled in Vega-Redondo (1997)). As long as memory includes at least one period, the long-run outcomes correspond to all the quantities in the interval between the Cournot quantity and the Walrasian one. There is a conceptual tension between the evolutionary stability associated to the Walrasian outcome (which relies on comparisons of simultaneous profits) and the stability of the Cournot-Nash equilibrium (derived from intertemporal comparisons of profits).