In this article, we investigate the local and global dynamics of a nonlinear duopoly model with price-setting firms and managerial delegation contracts (relative profits). Our study aims at clarifying the effects of the interaction between the degree of product differentiation and the weight of manager's bonus on long-term outcomes in two different states: managers behave more aggressively with the rival (competition) under product complementarity and less aggressively with the rival (cooperation) under product substitutability. We combine analytical tools and numerical techniques to reach interesting results such as synchronisation and on-off intermittency of the state variables (in the case of homogeneous attitude of managers) and the existence of chaotic attractors, complex basins of attraction, and multistability (in the case of heterogeneous attitudes of managers). We also give policy insights.
Multistability and complex basins in a nonlinear duopoly with price competition and relative profit delegation
Luciano Fanti, Luca Gori, Cristiana Mammana, Elisabetta Michetti; Multistability and complex basins in a nonlinear duopoly with price competition and relative profit delegation. Chaos 1 September 2016; 26 (9): 093110. https://doi.org/10.1063/1.4962296
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