Dynamic Oligopolies with Production Adjustment Costs

Single-product oligopolies, without product differentiation, are examined under the assumptionthat any increase in production levels has additional cost to the firms. Therefore, the bestresponse of each firm depends on the current output of the rest of the industry and on theprevious output of the firm. Two dynamic models are introduced. In the first case, the firmsform adaptive expectations on the output of the rest of the industry and select the best responseoutput levels and, in the second case, it is assumed that they adjust their output levels adaptively.Conditions are derived in both cases for the asymptotic stability of the equilibrium.