Statistical dynamics in a chaotic Cournot model with complementary goods

Abstract

This study sheds light on statistical properties of chaotic economic dynamics. To this end, it builds a simple Cournot dynamic model with two firms in which reactions functions are non-linear and goods are complements. When non-linearities get strong enough, the output adjustment process generates complex dynamics involving chaos. It is analytically as well as numerically demonstrated that for both firms, a long-run average profit taken along a chaotic trajectory can be higher than a profit taken at a stationary point. This result implies that chaotic dynamics can be beneficial from the long-run point of view.