Abstract
The purpose of SMS is twofold: to support research both in the theory of the market process and in the theory of individual behavio’r where information is imperfect or absent. This dual purpose is achieved by explicitly elaborating and integrating theoretical notions about both
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the dynamics of simultaneous random contacting in search markets with imperfectly informed individuals on both sides of the market and
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the dynamics of individual learning and adapting behavior starting with a substantial lack of information.
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References
For a survey see Witt (1980), part III.
See e.g. Aoki (1974), Chong/Cheng (1975), Barta/Varaiya (1976).
For the sake of improving the comparability of the success of the competing models, we assume that profits are not withdrawn. Thus performance can be measured by an accumulated wealth index which is based on the sum of self-financed invested capital and liquid funds in any period and is expressed as a multiple of initially invested capital.
Cf., e.g., Karlin/Taylor (1975), p. 443
Cf. Beyer e.a. (1978), pp. 43–45. This, of course, is only a necessary condition and not a sufficient one for a stochastic process to be stationary in the strict sense.
It seems remarkable that empirical work on welfare losses due to monopolistic elements in the economy just takes the assertion of an informed, profit maximizing monopolist for granted and bases the computations and estimations on it. See e.g. Cowling/Mueller (1978) and the literature cited there.
See e.g. Friedman (1953), p. 35 or Machlup (1967). An excellent discussion of this argument can be found in Winter (1975).
How and when bankruptcy or voluntary disengagement occurs in simulation of the response behavior is described in detail in ch. 5.2.
See Chamberlin (1950), pp. 89–92. He assumes two demand curves for each of the firms in the market: one representing variation of demand with price when all other firms maintain their prices and one for the case that all firms change prices uniformly, the latter, of course, being much less elastic than the former. To establish the assertion that, given these conditions, a quasi-competitve equilibrium results in the market despite the monopolistic power of each firm, Chamberlin not only argues with homogeneously and coincidentally acting firms, implying an actual movement on the second type of curves for all firms. He requires additionally a strong hypothesis about the development of the state of information: firms are presented as being misinformed and incapable of learning. Because they always act on the basis of the wrong demand curve they overestimate demand elasticity and thus have a permanent incentive to cut prices as long as these are higher than unit costs.
For surveys see Rothschild (1973), Salop (1976), Stiglitz (1979), Hey (1979).
For run III-K-3WWWA1-M we observed TOT’ = 70 and TOT’ = 141 for run III-K-4WWWA1-M. The only exception, showing identical prices for all K in nearly all periods, occurred in the run III-K-4000A1-M, see fig.s 2.2.7 and 2.2.8.
Accumulated wealth index plots are omitted since that index is no longer representative if initially invested capital values differ between the firms.
Cf., e.g., Billeter (1972), pp. 106–110.
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© 1982 Springer-Verlag Berlin Heidelberg
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Witt, U., Perske, J. (1982). Some Applications and Results. In: SMS — A Program Package for Simulation and Gaming of Stochastic Market Processes and Learning Behavior. Lecture Notes in Economics and Mathematical Systems, vol 202. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-48325-7_2
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DOI: https://doi.org/10.1007/978-3-642-48325-7_2
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