Effect of information asymmetry in Cournot duopoly game with bounded rationality

TL;DR

This paper examines how information asymmetry influences the stability of a Cournot duopoly with bounded rationality, demonstrating that information sharing stabilizes equilibrium and reduces chaos.

Contribution

It provides a theoretical and numerical analysis showing that information asymmetry can stabilize the Cournot-Nash equilibrium in duopoly models with bounded rationality.

Findings

Information asymmetry stabilizes the equilibrium.

Information reduces chaotic dynamics.

Theoretical and numerical evidence supports these effects.

Abstract

We investigate the effect of information asymmetry on a dynamic Cournot duopoly game with bounded rationality. Concretely, we study how one player's possession of information about the other player's behavior in a duopoly affects the stability of the Cournot-Nash equilibrium. We theoretically and numerically show that the information stabilizes the Cournot-Nash equilibrium and suppresses chaotic behavior in the duopoly.