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<p>This paper examines the impact of price elasticity of demand on dynamic Cournot oligopoly games with <i>N</i> firms operating under distinct scale effects. We consider a general isoelastic demand function and quadratic cost structures, allowing for increasing, constant, and decreasing returns to scale. Our study compares two adjustment mechanisms, i.e., the gradient (Model G) and the local monopolistic approximation (Model L). We overcome the challenge posed by the transcendental equilibrium equation for market supply by exploiting its special structural properties without solving closed-form solutions. A comparative static analysis reveals that higher demand elasticity leads firms to adopt divergent strategies, targeting either niche or mass markets. Additionally, we analyze local stability and bifurcations, demonstrating that price elasticity and cost structures significantly influence the models’ dynamics. Notably, our results show that Model L is globally asymptotically stable in duopoly markets.</p>

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Price elasticity of demand in oligopoly games with N firms under distinct scale effects

  • 期刊论文

  • 发表日期：

    2026年7月29日

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  • Xiaoliang Li,
  • Jing Yang,
  • Ally Quan Zhang

摘要

This paper examines the impact of price elasticity of demand on dynamic Cournot oligopoly games with N firms operating under distinct scale effects. We consider a general isoelastic demand function and quadratic cost structures, allowing for increasing, constant, and decreasing returns to scale. Our study compares two adjustment mechanisms, i.e., the gradient (Model G) and the local monopolistic approximation (Model L). We overcome the challenge posed by the transcendental equilibrium equation for market supply by exploiting its special structural properties without solving closed-form solutions. A comparative static analysis reveals that higher demand elasticity leads firms to adopt divergent strategies, targeting either niche or mass markets. Additionally, we analyze local stability and bifurcations, demonstrating that price elasticity and cost structures significantly influence the models’ dynamics. Notably, our results show that Model L is globally asymptotically stable in duopoly markets.