Cournot versus Walras in dynamic oligopolies with memory

This paper explores the impact of memory in Cournot oligopolies where firms learn through imitation of success as suggested in Alchian [J. Polit. Econ. 57 (1950) 211] and modeled in Vega-Redondo [Econometrica 65 (1997) 375]. As long as memory includes at least one period, the long-run outcome corresponds to any quantity between the Cournot one and the Walras one. The (evolutionary) stability of the walrasian outcome relies on interfirm comparisons of simultaneously observed profits (i.e., whether a firm earns more than others in a given period), whereas the stability of the Cournot-Nash equilibrium is derived from intertemporal comparisons of profits for each given firm (i.e., whether a deviation pays off for that firm).