Social Evolution and Aspiration Learning in Asymmetric Duopoly

Abstract

In the paper we develop the concept of social evolution and aspiration learning in duopolistic industries. Social learning is analysed in the framework of the model in which aspirations are linked to the normal profit of the economy. The general algorithm of social evolution and learning for asymmetric duopoly is presented and evolutionary equilibrium is examined. The derived results predict that in a duopolistic equilibrium all firms earn equal profits and joint-profit is maximized. The paper generalizes the result of Dixon (2000) and makes the aspiration learning algorithm applicable to the broad class of models.

Keywords: aspiration learning, social evolution, asymmetric duopoly

JEL Classification: L13, D4, C7