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Fulfilled Expectations Cournot Equilibria

"Network Externalities" defines and explores the Fulfilled Expectations Cournot Equilibria (FECE's) that result from the model assumptions. A FECE is a refinement of a standard Nash Equilibrium, so no single player can unilaterally change her strategy to increase her surplus. Furthermore, a FECE has the requirement that actual firm sales equal the sales expected by the consumers.

In this tutorial, we offer a visual method to explore the results of the article. To do this, we employ a variation on Newton's Method to search for the various equilibria implied by Equilibrium Reaction Correspondence curves. These curves describe the dependence that must exist between each firm's output, and the output of everyone outside of its network in a FECE.

Our method allows us to observe and track the FECE's of a group of firms under a variety of conditions. The way we do this will become clear in the slides to follow. Details of how FECE's are calculated and how we track them are given in the Technical Appendix.

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