Rational expectations and the Cournot-Theocharis problem
type: Item
instance of: scholarly article
title: Rational expectations and the Cournot-Theocharis problem
zbMATH Open document ID: 1152.91328
DOI: 10.1155/DDNS/2006/32103
author: Tönu Puu
published in: Discrete Dynamics in Nature and Society
publication date: 2007-03-19T00:00:00Z
full work available at URL: https://eudml.org/doc/129501
review text: Summary: In dynamic models in economics, often ``rational expectations'' are assumed. These are meant to show that the agents can correctly foresee the result of their own and the other agents' actions. In this paper, it is shown that this cannot happen in a simple oligopoly model with a linear demand function and constant marginal costs. ``Naive expectations,'' that is, where each agent assumes the other agents to retain their previous period action, are shown to result in a 2-period cycle. However, adapting to the observed periodicity always doubles the actual resulting periodicity. In general, it is impossible for the agents to learn any periodicity except the trivial case of a fixed point. This makes the whole idea of ``rational expectations'' untenable in Cournot oligopoly models.
Mathematics Subject Classification ID: 91A10
zbMATH DE Number: 5134631
MaRDI profile type: Publication
cites work: Q5563225
OpenAlex ID: W2042675495
description: scientific article; zbMATH DE number 5134631