Title :
Understanding the nature of predatory pricing in the large-scale market economy with genetic algorithms
Author :
Chen, Shu-Heng ; Ni, Chih-Chi
Author_Institution :
AI-ECON Res. Grou, Nat. Chengchi Univ., Taipei, Taiwan
Abstract :
This paper applies co-evolutionary genetic algorithms to an economic modelling problem. The chain-store game is a game-theoretic model for predatory pricing (price wars); the modelling goal is to study when predatory pricing can arise. It is found that, even under the same payoff structure, the results of the co-evolution of weak monopolists and entrants are sensitive to the representation of the decision-making process. Two representations are studied: 1) the action-based representation, and 2) the strategy-based representation. The former is to represent a naive mind and the latter is to capture a sophisticated mind. For the action-based representation, the convergence results are easily obtained and predatory pricing is only temporary in all simulations. However, for the strategy-based representation, predatory pricing is not a rare phenomenon and its appearance is cyclical but not regular
Keywords :
commerce; costing; economics; game theory; genetic algorithms; management science; marketing; action-based representation; chain-store game; decision-making process; economic modelling; game theory; genetic algorithms; large-scale market economy; predatory pricing; strategy-based representation; Books; Convergence; Decision making; Economics; Game theory; Genetic algorithms; Large-scale systems; Manufacturing; Pricing; Robustness;
Conference_Titel :
Intelligent Control, 1996., Proceedings of the 1996 IEEE International Symposium on
Conference_Location :
Dearborn, MI
Print_ISBN :
0-7803-2978-3
DOI :
10.1109/ISIC.1996.556227