A Incomplete Information Dynamic Game Of Oligopoly

Decision-making behavior of oligopoly firms is an important aspect of the firm theory in economics. The characteristic of oligopoly marker is several firm provides all or most of the products in a certain industry. The production of these firm accounts for a large share in the certain industry, thus each firm all has the enormous impact to the quantity and price of the product market. Because of that, the firm decision-making can not be isolated, they depend on each other and mutually restrict. They must consider competitors'countermeasures before decision-making, and form their own strategies as taking account of the possible responses to others. Since the complex nature, competition and cooperation are often coexisting in oligopoly market, and it is often difficult to predict the consequences of one's decision. Therefore, there are no firm conclusions to oligopoly determination analysis, which cause the oligopoly firm's behavior analysis is the most difficult theoretical issue in market theory, and the theory about that is also the most imperfect.Game theory researches the theory of rational person behavior, and has become an important analysis tool in mainstream economics as the extensive, complex of its research object. Gives actors interaction mechanisms in the model assumptions, game theory provide a powerful and effective instrument to analysis oligopoly firm's decision-making behavior.Review the works of oligopoly market analysis with non-cooperative game theory, prices game output game and location game are the common analysis method, and the present research mostly focused on location game and prices game. Taking the perspective of output game and using signaling game as main analysis method, this paper establish the incomplete information dynamic game model to analysis the output competition strategy of oligopoly firms.Leader's marginal cost as private information of the leader, the leader will always choose Stackelberg optimal output according to the marginal cost. And the follower will also choose corresponding Stackelberg optimal output according to the leader's decision. It demonstrates that concealing the marginal costs will have insignificant impact in oligopoly competition market.In the situation of the quantity-price rate as private information of the leader, we can see that as long as the market quantity-price rate vary beyond the certain scope, the leader re-enacted the optimal output according to the value of the rate. And the leader will probably produce the Stackelberg optimal output of high quantity-price rate when it ranges in the certain scope. Meanwhile, the follower faces more complex choices. In three different pooling equilibriums, the follower selected three entirely different equilibrium strategies.Market demand parameter as private information of the leader, the game model gets six pooling equilibriums and a separating equilibrium in different conditions. The model's equilibrium outcome is more complex than the type which quantity-price rate is private information. The model will have pooling equilibrium when market demand ranges in the certain scope, and separating equilibrium as market demand vary beyond the certain scope. In the pooling equilibrium, if marginal cost is large enough, the leader will choose Stackelberg optimal output under high market demand, and Stackelberg optimal output of low market demand under low marginal cost.Contrast three models, we can see that in the separating equilibrium, the leader firm will produce the optimal quantity as under complete information. Observed that the leader's output, the follower will also produce the corresponding optimal quantity. Under the conditions of incomplete information, the model gets the same results with the Stackelberg model. Meanwhile, the uncertainty of market demand exists, no matter what result of this uncertainty factors. Oligopoly firms will be similar to the choice of a competitive strategy.Incomplete information in three different conditions, the output of oligopoly firms chooses different competitive strategy. In this paper, through releasing Stackelberg model assumptions, we establish incomplete information dynamic mode, analysis the oligopoly firm's optimal response strategy under the situation of cost and market uncertainty. Further has developed Stackelberg model application scope, has enriched the oligopoly theory.However, in reality, the competitive oligopoly firms are not only a simple decision to decide output or prices, but also decide the new technology, lower prices, advertising and other marketing aspects simultaneously. Therefore, the results can hardly be directly applied to this reality. In future research should explore the theory and reality to organically integrate, in order to develop the model can be directly applied.