In this chapter, we analyze the properties of evolutionary switching models for oligopoly games, where boundedly rational agents can follow different behavioral rules (or heuristics) to update their production through repeated adaptive decisions. In particular, we focus on well-known heuristics such as best reply with naive expectations, local monopolistic approximation and gradient dynamics on marginal profits. These heuristics are characterized by the property that Nash equilibria are fixed points of the corresponding dynamic processes. The population of firms in the oligopoly is subdivided into fractions of adopters of the different heuristics. Firms are allowed to switch over time between different behavioral rules according to profit-driven evolutionary pressure. The chapter examines some specific examples of evolutionary systems. Coexistence of heterogeneous behaviors as well as oscillatory time patterns are obtained as possible outcomes of the proposed evolutionary models.
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Front Matter
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PART I: BASIC GAMES IN INDUSTRIAL ORGANIZATION
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PART II: DYNAMIC GAMES IN INDUSTRIAL ORGANIZATION
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PART III: GAMES OF COLLUSION IN INDUSTRIAL ORGANIZATION
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PART IV: INFORMATION GAMES
