Chiara Margaria

Computer Science and Simulation for Economics

Project work on

"Cournot oligopoly."


The applet requires Java 1.4.1 or higher. It will not run on Windows 95 or Mac OS 8 or 9. Mac users must have OS X 10.2.6 or higher and use a browser that supports Java 1.4. (Safari works, IE does not. Mac OS X comes with Safari. Open Safari and set it as your default web browser under Safari/Preferences/General.) On other operating systems, you may obtain the latest Java plugin from Sun's Java site.

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view/download model file: cournot_oligopoly.nlogo


This model try to show what the interaction between oligopolists deciding according the Counot model produces, both in the classic assumption over the formulation of strategical decision case and in a more "realistic".


Firms make decisions simultaneously over output quantities and the market price is determined mechanically by market demand when firms turn out the planned production by putting on the market a pile of goods.
In the basic case firms maximise the profits on the assumption that outputs of other firms are constant.
If BETTER_ASSUMPTION SWITCH is on, firms assume that other firms make the same correction to the quantity produced as themselves.


The N input box determines the initial number of firms.
The BETTER_ASSUMPTION switch determines the firms' way of developing the strategy, as explained above.
A and B are the parameters of the inverse demand function.
The VC_MAX slider determines the maximun variable cost of firms.
SETUP create the word with the given number of firm, each with a random variable cost less than or equal to VC_MAX and an exogenous decision over quantity to produce.
The CHANGE_VC button change the variable costs of the firms, by generating new random variable costs for every firm.
RUN_MARKET starts the simulation. The PRICE monitor show the price determined by market demand, given the quantity produced by firms.
The PRICE AND COSTS PLOT shows a line plot of the price and the variable costs of firms.
The PROFIT PLOT shows a bar plot of the profits of firms.


In a world with two firms, an equilibrium is always reached.
In a world with more firms, an equilibrium is found when firms assume that other firms make the same strategy correction, and only sometimes otherwise.


It is interesting during the simulation to change inverse demand function parameters or to move the BETTER_ASSUMPTION slider to see how the equilibrium or non-equilibrium will change.
Alternately it could also be interesting change the variable costS of firms, for example, by setting the same one for all firms or by increasing or decreasing the variable cost of every firm by the same amount.
In the case of equal variable cost for all firms, if the modified Cournot model is running (BETTER_ASSUMPTION switch ON), all the firms will produce, in equilibrium, the same quantity.


It could be add the possibility of creating links between agent, so that they try to maximize the joint profit.
Also the possibility to make new firms enter the market during the simulation could be interesting.


The PRICE AND COSTS and PROFIT plot use temporary pen to draw the variable cost for all firms.