The "Win-Continue, Lose-Reverse" Rule in Oligopolies: robustness of collusive Outcomes

Abstract: The so-called “Win-Continue, Lose-Reverse” (WCLR) rule is a simple iterative procedure that can be used to choose a value for any numeric variable (e.g. setting a price or a production level to maximise profit). The rule dictates that one should evaluate the consequences of the last adjustment made to the value (e.g. an increase or a decrease in production), and keep on changing the value in the same direction if the adjustment led to an improvement (e.g. if it led to greater profits), or reverse the direction of change otherwise. Somewhat surprisingly, this simple rule has been shown to lead to collusive outcomes in Cournot oligopolies, even though its application requires no information whatsoever about the choices made by any competing firms or about their results. In this paper we show that the convergence of the WCLR rule towards collusive outcomes can be very sensitive to small independent perturbations in the cost functions or in the income functions of the firms. ...

• Type: Journal
• Year: 2015
• Where: ADVCS
• Authors: Segismundo S. Izquierdo, Luis R. Izquierdo
• Keywords: ADVCS 2015, Programming Languages