On the dynamics of economic games based on product differentiation

Defining a micro-economics-based demand structure of differentiated products, we analyse the conditions for stability of the Cournot–Nash and the Bertrand–Nash equilibria. We find that, in the presence of both complements and substitute goods, the stability of the Nash equilibrium increases when goods tend to be independent. Moreover, the Nash equilibrium is also more stable under quantity competition than under price competition, regardless of whether goods are complements or substitutes.