Monopoly, oligopoly and the invisible hand (Q1433615)

The authors investigate the behaviour of a discrete-time, nonlinear model characterized by agents with bounded rationality and product differentiation. Each firm decides its production and price based on the restricted local information so as to raise its profit. Each consumer has his favorite firm and exhibits habitual purchasing behaviour unless price differences exceed a certain critical level. Monopoly and oligopoly emerge as a result of competitious, led by the invisible hand (so to speak), so that one can say that they are not the barrier against competition but the outcome of competition. Moreover, it is shown that oligopoly, not monopoly, is the final state of market economy as the control parameter of consumer brand loyality increases.