Emilio Dal Molin, Christophe Feder

Computer Science and Simulation for Economics

Project work on

"Oligopolies and cartels in communication market."


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: oligopolies_and_cartels_in_communication_market.nlogo


This model simulates a simple telephone market, with four firms.


Each patch represents one firm, each telephone represent an agent.
If an agent is on a patch, this means that the he has a contract with that telephone operator.

The are no costs for the firms, and the profits are given by the sum of the costs of the agents. The agents change their telephone operator (they move to another patch) if another operator is cheaper, on the basis of the calls they have done.
The firms change their prices, increasing them if the profits are growing and decreasing them if teh profits are falling. There is not a maximization, but an attempt to make profits increase.


The "setup" button creates the patchs and the telephones. The number of the agents (telephones) depends on the value reported on the slider "number".
The "go" button runs the simulations forever. The firms change their prices as the value reported on the slider "change-time" changes.

The "move-cost" and "inform" sliders represents two features of the telephone market. The first represents the cost, not only pecuniary, of changing the telephone operator.
The second represents the possibility of a not right valutations of the costs that could be met with another telephone operator, higher or lower than the right one.

The switch "cartel", if it is on, activates a simple behaviour of the four firms as a monopolist, sharing the profits in equal parts.


Before reaching the equilibrium, the consumers shift on the market until all consumers subscribe to the same telephone company. When this equilibrium is reached, the prices of the only active company are constant.
When the equilibrium si reached by the market, we can see that it is not a stalemate. The consumers continue to change telephone company simultaneously because it is more convenient for everyone.

Moreover, we can see how this competition leads to a reduction of prices and profits for all firms. Prices are slightly higher than the average costs and profits are higher than the zero.


If the number of consumers increases you will see only an increase of the time for reach equilibrium, compared to the basic model.
If you have a cartel the equilibrium becomes stable.
If move-cost raise, the movement of consumers among the companies becomes slower. When move-cost is very high, the equilibrium becomes stable. Sometimes, you can reach the equilibrium with several firms that remain active in the market.
If change-time increases, we have only a slowing in reaching the equilibrium and in following movements.
If you have an asymmetric information, the market can not reach a stable equiibrium (if - 1 <= inform <= 1 nothing changes).


The model can be extended both on the side of the firms, creating a more "optimizating" modality for changing prices and a more complex structuring for the cartel, and mainly on the side of the agents, creating social networks between the agents.