Evolved Perception and Behaviour in Oligopolies

Robert E. Marks
University of New South Wales, Sydney
R.Marks@unsw.edu.au
http://www.agsm.unsw.edu.au/~bobm

Abstract

A previous study, which examined oligopolists as responding simply to past prices of their strategic rivals, used data from a mature market with stable rules of thumb (mappings from past actions or states of the market to present prices) for the oligopolists' behaviour, whether purposefully learnt or emerging from the natural selection of the rivalry. The earlier study imposed exogenous partitions on the action space, as perceived by the players. This study explores how such perceptions might be endogenised. A firm answer to the question of how oligopolists partition their perceptions of others' actions, both through time and across the price space, will also provide information on how much or how little information they choose to use: in short, how boundedly rational oligopolists are. We use data from a retail coffee market to examine the evolved optimal partitioning and mapping of price space, manifest as the oligopolists' rules of thumb.