Evolved Perception and Behaviour in Oligopolies


This paper builds on earlier studies which examined oligopolists in a repeated interaction as responding simply to past prices of their strategic rivals, and which 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 studies 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 the oligopolists have chosen to be. 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. The data suggest that brand managers are using very little information: whether prices changed or not.

May 1997 revision of the paper in Acrobat PDF 3.0 format

Last altered on May 16, 1996.