On the dynamic stability of a price dispersion model using gradient dynamics

Jean Paul Rabanal, Dongwook Lee

Research output: Contribution to journalArticleResearchpeer-review

Abstract

This paper studies the evolutionary stability of a unique Nash equilibrium in a price dispersion model (Burdett and Judd, 1983) using gradient dynamics. The numerical solution to the partial differential equation that governs the evolution of prices shows that the stationary equilibrium is not a Nash Equilibrium and that it differs from the cyclical behavior predicted by another family of dynamics, such as replicator and logit, in a continuous action space.

Original languageEnglish
Pages (from-to)32-42
Number of pages11
JournalJournal of Economic Dynamics and Control
Volume84
DOIs
Publication statusPublished - 1 Nov 2017
Externally publishedYes

Keywords

  • Evolutionary dynamics
  • Gradient dynamics
  • Population games
  • Price dispersion

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