Learning in a dynamic producer-consumer market (Q1332374)

The paper considers continuous-time single-product dynamic producer- consumer markets with three types of expectation schemes of firms on the output of its competitors. These expectation schemes are combined with differential equations on the output adjustment of firms and the price adjustment of the market giving rise to a non-homogeneous system of linear differential equations with constant coefficients. In the case of Cournot expectations the real parts of all eigenvalues are negative, which implies global asymptotic stability. In the case of adaptive expectations a condition that is necessary and sufficient for this type of stability to occur is derived for the case of an incomplete as well as complete information of the market on the prevailing price. This task is also solved for the case of extrapolative expectations giving rise there too for a single condition on the parameter that characterizes the employed expectation schemes. The three cases are compared with each other and related to corresponding stability theorems proved earlier for multiproduct oligopolies.