TITLE:
Dynamic Monopoly with Demand Delay
AUTHORS:
Akio Matsumoto, Ferenc Szidarovszky
KEYWORDS:
Monopolist Competition; Demand Fluctuations; Bounded Rationality; Fixed Time Delay; Continuous and Discrete Dynamics
JOURNAL NAME:
Theoretical Economics Letters,
Vol.4 No.2,
March
13,
2014
ABSTRACT:
This study analyses the
dynamics of nonlinear monopoly. To this end, the conventional assumptions in
the text-book monopoly are modified; first, the complete information on the
market is replaced with the partial information; second, the instantaneous
information is substituted by the delay information. As a result, since such a
monopoly is unable to jump, with one shot, to the optimal point for which the
profit is maximized, the monopoly has to search for it. In a continuoustime
framework, the delay destabilizes the otherwise stable monopoly model and
generates cyclic oscillations via a Hopf bifurcation. In a discrete-time
framework, the steady state bifurcates to a bounded oscillation via a
Neimark-Sacker bifurcation. Although this has been only an introduction of
delay into the traditional monopoly model, it is clear that the delay can be a
source of essentially different behavior from those of the nondelay model.