Chaotic dynamics in a three-dimensional map with separate third iterate: The case of Cournot duopoly with delayed expectations

Abstract

We consider a Cournot duopoly with isoelastic demand function and constant marginal costs. We assume that both producers have naive expectations but one of them reacts with delay to the move of its competitors, due to a “less efficient” production process of a competitor with respect to its opponent. The model is described by a 3D map having the so-called “cube separate property”, that is its third iterate has separate components. We show that many cycles may coexist and, through global analysis, we characterize their basins of attraction. We also study the chaotic dynamics generated by the model, showing that the attracting set is either a parallelepiped or the union of coexisting parallelepipeds. We also prove that such attracting sets coexist with chaotic surfaces, having the shape of generalized cylinders, and with different chaotic curves.