Stability of Equilibrium Prices in a Dynamic Duopoly Bertrand Game with Asymmetric Information and Cluster Spillovers

Bounded rationality, asymmetric information and spillover effects are widespread in the economic market, and had been studied extensively in oligopoly games, but few references discussed incomplete information in a duopoly market with rationality expectations. Considering the positive externalities brought by the spillover effect between enterprises in a cluster, a duopoly Bertrand game with bounded rationality and asymmetric information is proposed in this paper. In our model, a firm with private information, high or low marginal cost, is introduced. Interestingly, our theoretical analysis reveals that: (1) In a dynamic duopoly Bertrand game with perfect rationality and asymmetric information, the equilibrium price is positively correlated with product substitution rate and the probability of a high marginal cost, while it is negatively correlated with the cluster spillover. (2) In a dynamic duopoly Bertrand game with asymmetric information and adaptive expectation adopted by both firms, the Nash equilibrium prices are always asymptotically stable. (3) In a dynamic duopoly Bertrand game with heterogenous expectation and asymmetric information, where two firms use adaptive expectation and boundedly rational expectation respectively, the Nash equilibrium prices are locally stable under certain conditions. Furthermore, results indicate that, high product substitution rate or large probability of high marginal cost for firm 2 with private information may make the market price unstable, bifurcating or even falling into chaos, while high technology spillover is conducive to stabilize the market by contrast. It is also shown that the chaos can be controlled by a hybrid control strategy with the state variables feedback and parameter variation. Our research has an important theoretical and practical significance to the price competition in oligopoly markets.

Are firms' expectations on the availability of external finance rational, adaptive or regressive?

PurposeThis study investigates which expectation formation mechanism governs Eurozone firms regarding their expectations on external finance availability.Design/methodology/approachIn this study, we link consecutive surveys from the Survey on the Access to Finance of Enterprises to bring new evidence on how non-financial corporations shape their expectations on external finance availability.FindingsIn line with the past literature, we demonstrate that the data reject the Rational Expectations hypothesis, and we find evidence in favor of the Adaptive Expectation mechanism.Originality/valueThis is the first study studying firms' expectations of external finance availability, implementing survey data of firms' expectations from the SAFE database on a country level. The formation of firm expectations is vital in directing policymakers in designing appropriate monetary policies, as both the employment and inflation targets of central banks around the world are highly dependent on the firm-level decision process.

Mutation of Cultural Information on the Use of Plant Complexes in Local Medical Systems

Despite being an affable strategy of adaptive expectation, the transmission of cultural information can result in unintended changes in the information. This is known as “mutation” in the theory of cultural evolution. The occurrence of information mutations in local medical systems may be greater in some situations. For example, “vegetable complexes” can be used as good study models to show a greater accumulation of mutations due to the variation in the mixtures and combinations of information. Here, we tested the following hypotheses: (H1) medicinal plants in plant complexes generate a greater accumulation of mutations than isolated plants in local medical systems; (H2) information on the medicinal function of the plant species generates a greater proportion of mutations than information on the parts of plants used medicinally; (H3) plants in plant complexes perceived as less efficient undergo more information mutational events; and (H4) changes in information on plant complexes are more random (mutation) than intentional (guided variation). We conducted the study in the Lagoa do Junco community, state of Alagoas, Northeast Brazil. For data collection, we used semistructured interviews to address the use of isolated medicinal plants and plant complexes. Additionally, we assessed the informants’ perceptions about the effectiveness of the plants used in these preparations. We found that the mutation rate was higher when isolated plants were used than when plant complexes were used (p=0.02), and it was also higher for function than for parts of the medicinal plants (p<0.001). No relationship between the mutations and perceived efficiency of the plants (p=0.19) was observed, and changes in information were more random (mutation) than intentional (guided variation) (p<0.001). From an evolutionary perspective, greatly varying information, such as that on plant complexes, did not explain a greater accumulation of mutations. Thus, we suggested that further studies that include other evolutionary parameters that may cause the accumulation of information mutations must be conducted.

Supply Response Analysis Of Indonesian Cocoa

The Supply response of cocoa in Indonesia is done through an approach to the area of cocoa plantations, in response to economic factors and non-economic factors. Data analyzed from 1985 to 2015 (time series). The aim is to find out the factors that affect the area of cocoa plantations in Indonesia and the response of the offer of cocoa in Indonesia seen from the value of short-term elasticity and long-term elasticity. The partial adjustment and adaptive expectation model was applied and continued with an analysis of Seemingly Unrelated Regression Equations (SURE). The results of the analysis show that the factors affect the area of cocoa plantations in Indonesia are on smallholder plantations, namely coffee prices, rubber prices, and technology. In the state plantations, namely the previous year's cocoa plantation area, rubber prices, technology, and government policy. In private plantations, namely rubber prices, technology, and labor costs. Supply response of cocoa that is in line with the value of elasticity both short and long term is inelastic which means that it is following expectations, where the value of long-term elasticity is greater than the value of short-term elasticity

HETEROGENEOUS OR HOMOGENEOUS INFLATION EXPECTATION FORMATION MODELS: A CASE STUDY OF CHINESE HOUSEHOLDS AND FINANCIAL PARTICIPANTS

This paper attempts to identify whether the inflation expectation formation models adopted by Chinese agents are heterogeneous or homogeneous. A Gaussian mixture model is developed assuming that agents form inflation expectations by selecting a model from alternatives. Analysis results reveal that only adaptive expectation (AE) model is significant, indicating that both households and financial participants are fairly homogeneous in selecting inflation expectation formation models. Therefore, the mechanism of heterogeneous models is inoperative in explaining the heterogeneous inflation expectations in China, and the AE is the main driver of Chinese agents’ perceptions about cost.

ANALISIS FAKTOR-FAKTOR YANG MEMPENGARUHI INDEKS HARGA SAHAM DI INDONESIA

Since 1998, Indonesia capital market experiencing rapid development, go public activity in stock exchange and stock trading activity getting crowded. People interest observes monetary factors such as money circulation, deposit interest, foreign currency exchange, and inflation that predicted affecting compound stock index in Jakarta stock exchange from 1998 to 2002. Time series data from 1998-2002 gained from published issues like financial statement Indonesian Bank, Body of Statistic Center, and other sources. This research using adaptive expectation model analysis tools, that is rationalization model proposed by Nerlove, as stock adjustment model or partial adjustment model (PAM). Use of this model bring advantage in short and long term analysis.