Econometrica: Sep, 1977, Volume 45, Issue 6

A Convergent Adjustment Process for Firms in Competition

https://doi.org/0012-9682(197709)45:6<1349:ACAPFF>2.0.CO;2-A
p. 1349-1363

D. J. Gates, D. J. Wilson, J. A. Rickard

This paper describes a market in which firms vary their quantities of production according to a new adjustment process. Each firm bases its new production entirely upon a knowledge of its own previous productions and profits. It has no knowledge of the payoff functions of the market. Numerical analysis of the process indicates an approach to equilibrium for all initial states. The set of allowed limit points is rigorously characterized, and determined explicitly in the case of two firms. Some exact solutions are found. The process can be regarded as a way of playing a continuous game with a minimum of information.