Simulation



Reference

Based on:


And additional work by Keen, Legge, Fishburn, and Standish.

Theory

This summary ignores certain problems in aggregating cost curves for welfare comparisions between perfect competition and monopoly.

The model assumes that the market demand curve and the marginal cost curve for each firm are straight lines. The following tables define the parameters of these lines and show some theoretical solution values.

MARKET AND FIRM PARAMETERS
PARAMETER SYMBOL
Price Intercept of Market Demand Function a
Quantity Intercept of Market Demand Function a/b
Additive Inverse of Slope of Market Demand Function b
Number of Firms n
Price Intercept of Firm Marginal Cost Function c
Slope of Firm Marginal Cost Function d

EQUILIBRIUM VALUES
TOTAL QUANTITY
SUPPLIED TO MARKET
QUANTITY SUPPLIED
BY EACH FIRM
PRICE
Monopoly (a-c)/(2 b + d) (a-c)/(2 b + d) (a b + a d + b c)/(2 b + d)
Cournot n (a-c)/[(n + 1) b + d] (a-c)/[(n + 1) b + d] (a b + a d + n b c)/[(n + 1) b + d]
Perfect Competition (a-c)/b 0 c

Initial Values

When running the simulation, you are given two choices for two settings for the initial values:

Control Parameters

When running the simulator you are given three choices for controlling the updating of the quantities produced by each firm:

Source Code

The source.

The most important code fragment is: