Structurally Stable Nash Equilibria in Pure Strategies for a Model of Monopolistic Competition

Sung Hyun Kim

Korea Information Society Development Institute (KISDI), 1-1 Juam-dong, Kwachun, Kyunggi-do, 427-710, Republic of Korea, Tel: +82-2-570-4220, Fax: +82-2-570-4169 sungkim@kisdi.re.kr

JEL Classification: C72, D43

Abstract

A model of monopolistically competitive industry is formulated using the theory of large games. We show that an equilibrium exists for the game and that equilibrium correspondence is upper hemi-continuous. The model's implications are discussed, especially on existence and characteristics of structurally stable equilibria and on the relationship to Kumar and Satterthwaite's (1985) model.

Keywords:

Large games, Monopolistic competition, Continuity, Stability

Acknowledgments

The research reported in this paper first began as a chapter of my Ph.D dissertation at the Johns Hopkins University. I thank M. Ali Khan and H. Peyton Young for inspiration and encouragement. I also thank an anonymous referee for helpful and constructive comments. All errors are solely mine.

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