Increasing Compatibility Among Three Firms

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Three Firms under Full Compatibility

Note: in order to run the simulation referred to in this slide, go here, to the Java Applet version. You will be directed to download the latest version of the Java plug-in.

Finally, we present the only possible equilibrium in the case of a three-firm network. Press "Go" several times to reach it. Watch the graph on the lower left closely, as the firms' outputs oscillate to become stable. The three firms' outputs under these conditions are equal, as they must be in any full-compatibility equilibrium.

The output of every firm in this case converges to 10.90.

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