The Best Player Rule Impact of Imitation and Memory in Dynamic Cournot Oligopolies

In this thesis, we explore the impact of imitation with memory in the context of Cournot oligopolies. We model imitation with memory according to the best player rule by adjusting the model developed by Vega-Redondo (1997) and Alós-Ferrer (2004). We run computer simulations with this model to determine how the best player rule affects the market outcome in the long-run in a Cournot oligopoly and how this outcome is influenced by memory length. We show that this model has in fact only one stochastically stable state, namely the Walrasian equilibrium. Moreover, this result is obtained regardless of the number of firms in the market or the memory length and is not affected by changes in the model parameters, such as the slope and intercept of the inverse-demand function. It also seems that relative payoff considerations remain more important than absolute ones when memory is introduced to this model, explaining why all other quantities lack stability. We therefore conclude that the best player rule leads to the Walrasian equilibrium in the longrun in a Cournot oligopoly, regardless of the number of firms in the market or the memory length, and that this result is robust with respect to the model parameters.