Discrete Dynamics in Nature and Society
Volume 2008 (2008), Article ID 905143, 20 pages
doi:10.1155/2008/905143
Research Article
Triumph over Your Rivals in Dynamic Oligopoly
Division of Economics, School of Humanities and Social Science, Nanyang Technological University, Nanyang Avenue, 639798, Singapore
Received 23 March 2008; Accepted 10 July 2008
Academic Editor: Akio Matsumoto
Copyright © 2008 Weihong Huang. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Abstract
Challenging the conventional belief that sophistication in strategy is always better, it was found in W.
Huang (2002a) that a price-taker who adopts the Cobweb strategy yields higher profits than those who adopt
more sophisticated strategies. This study explores the possibility of improving further the relative profit
advantage that the price-taker has over its counterparts through incorporating the growth-rate adjustment
strategy. A linear heterogenous oligopoly model is used to illustrate the merits of such strategy in the case of
disequilibrium. It is shown in theory and supported with numerical simulations that the adoption of growth-rate
adjustment strategy together with price-taking strategy confers on the price-taker the stabilization power
in a dynamically unstable market in addition to better relative performance in terms of major performance
measures.