The parameter basin and complex of dynamic game with estimation and two-stage consideration

This paper analyses the dynamics of a duopoly Cournot game model with players having different adjustment mechanisms and expectations, where one player adopts "one-period look-ahead" behavior and makes his decision based on his estimations, the other player makes his decision based on myopic adjustment equation and naive expectation (a bounded rational mechanism). Dynamic system concepts are integrated into this game model for understanding the evolution of the strategic decisions over multiple time periods. This paper studies the estimation accuracy by assuming that the second player makes his estimation based on recursive least-square (RLS) algorithm and compares the profit in two-period decision-making process with that in one-period decision-making process. It also analyzes the local stability and global stability of this system by assuming that the second player has accurate estimations. The results have an important theoretical and practical significance to the game models with two-stage consideration.

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