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on Game Theory |
| By: | Hideo Konishi (Department of Economics, Boston College); Michel Le Breton (Toulouse School of Economics, Toulouse Capitole University); Shlomo Weber (Southern Methodist University) |
| Abstract: | In this paper, we define additive dyadic social interactions games (ADG), in which each player cares not only about the selected action, but also about interactions with other players, especially those who choose the same action. This class of games includes alliance formation games, network games, and discrete choice problems with network externalities. While it is known that games in the ADG class admit a pure strategy Nash equilibrium that is a maximizer of the game's potential, the potential approach does not always apply if all coalitional deviations are allowed. We then introduce a novel notion of a strong landscape equilibrium, which relies on a limited scope of coalitional deviations. We show the existence of a strong landscape equilibrium for a class of basic additive dyadic social interactions games (BADG), even though a strong Nash equilibrium may fail to exist. Somewhat surprisingly, a potential-maximizing strong landscape equilibrium is not always a strong Nash equilibrium even if the set of the latter is nonempty. We also provide applications and extensions of our results. |
| Keywords: | Social Interactions Game, Potential Function, Coalition Formation, Strong Nash Equilibrium, Strong Landscape Equilibrium |
| JEL: | C71 C72 C78 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:kyo:wpaper:1120 |
| By: | Emmanuelle Augeraud-V\'eron; Daria Ghilli; Fausto Gozzi; Marta Leocata |
| Abstract: | The aim of this paper is to formulate and study a stochastic model for the management of environmental assets in a geographical context where in each place the local authorities take their policy decisions maximizing their own welfare, hence not cooperating each other. A key feature of our model is that the welfare depends not only on the local environmental asset, but also on the global one, making the problem much more interesting but technically much more complex to study, since strategic interaction among players arise. We study the problem first from the $N$-players game perspective and find open and closed loop Nash equilibria in explicit form. We also study the convergence of the $N$-players game (when $n\to +\infty$) to a suitable Mean Field Game whose unique equilibrium is exactly the limit of both the open and closed loop Nash equilibria found above, hence supporting their meaning for the game. Then we solve explicitly the problem from the cooperative perspective of the social planner and compare its solution to the equilibria of the $N$-players game. Moreover we find the Pigouvian tax which aligns the decentralized closed loop equilibrium to the social optimum. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.21397 |
| By: | Youngjae Jeong |
| Abstract: | This paper develops a novel econometric framework for static discrete choice games with costly information acquisition. In traditional discrete games, players are assumed to perfectly know their own payoffs when making decisions, ignoring that information acquisition can be a strategic choice. In the proposed framework, I relax this assumption by allowing players to face uncertainty about their own payoffs and to optimally choose both the precision of information and their actions, balancing the expected payoffs from precise information against the information cost. The model provides a unified structure to analyze how information and strategic interactions jointly determine equilibrium outcomes. The model primitives are point identified, and the identification results are illustrated through Monte Carlo experiments. The empirical application of the U.S airline entry game shows that the low-cost carriers acquire less precise information about profits and incur lower information costs than other airlines, which is consistent with their business model that focuses on cost efficiency. The analysis highlights how differences in firms' information strategies can explain observed heterogeneity in market entry behavior and competition. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.19140 |
| By: | Filippo De Feo (Institut für Mathematik, Technische Universität Berlin); Giorgio Fabbri (Université Grenoble Alpes; INRAE); Silvia Faggian (Ca’ Foscari University of Venice); Giuseppe Freni (Parthenope University of Naples) |
| Abstract: | We study optimal and strategic extraction of a renewable resource that is distributed over a network, migrates mass-conservingly across nodes, and evolves under nonlinear (concave) growth. A subset of nodes hosts extractors while the remaining nodes serve as reserves. We analyze a centralized planner and a noncooperative game with stationary Markov strategies. The migration operator transports shadow values along the network so that Perron–Frobenius geometry governs long-run spatial allocations, while nonlinear growth couples aggregate biomass with its spatial distribution and bounds global dynamics. For three canonical growth families, logistic, power, and log-type saturating laws, under related unilities, we derive closed-form value functions and feedback rules for the planner and construct a symmetric Markov equilibrium on strongly connected networks. To our knowledge, this is the first paper to obtain explicit policies for spatial resource extraction with nonlinear growth and, a fortiori, closed-form Markov equilibria, on general networks. |
| Keywords: | Harvesting, spatial models, differential games, nature reserves |
| JEL: | Q20 Q28 R11 C73 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ven:wpaper:2025:22 |
| By: | Heng-fu Zou |
| Abstract: | This paper embeds yardstick competition in a dynamic mean field a mean game (MFG) framework to analyze the regulation of industries with a continuum of cost-reducing firms. Each firm faces a stochastic cost process -- modeled explicitly as Ornstein-Uhlenbeck (OU), Cox-Ingersoll-Ross(CIR), or Geometric Brownian Motion(GBM)-and chooses continuous-time effort to lower cost. A regulator sets each firm's price equal to the contemporaneous mean cost of the population. We formulate and solve the coupled Hamilton-Jacobi-Bellman and Fokker-Planck system describing this economy, prove existence and uniqueness of equilibrium using the Lasry-Lions monotonicity framework, and show that the yardstick mech anism achieves the social first best in closed form. For each diffusion process we derive fully explicit formulas for equilibrium effort, mean cost paths, adjustment speeds, and welfare, allowing complete comparative statics and shock analysis without numerical simulation. The model pro- vides a tractable and policy-ready extension of Shleifer's (1985) original insight, demonstrating that yardstick competition yields robust, efficient incentives even in large dynamic industries subject to stochastic shocks. |
| Date: | 2025–09–20 |
| URL: | https://d.repec.org/n?u=RePEc:cuf:wpaper:796 |
| By: | Francis Bloch; Bhaskar Dutta; Marcin Dziubi\'nski |
| Abstract: | We propose and study a model of strategic network design and exploration where the hider, subject to a budget constraint restricting the number of links, chooses a connected network and the location of an object. Meanwhile, the seeker, not observing the network and the location of the object, chooses a network exploration strategy starting at a fixed node in the network. The network exploration follows the expanding search paradigm of Alpern and Lidbetter (2013). We obtain a Nash equilibrium and characterize equilibrium payoffs in the case of linking budget allowing for trees only. We also give an upper bound on the expected number of steps needed to find the hider for the case where the linking budget allows for at most one cycle in the network. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.16994 |
| By: | Arunava Patra; C. F. Sagar Zephania; Sagar Chakraborty |
| Abstract: | In a mix of prejudiced and unprejudiced individuals engaged in strategic interactions, the individual intensity of prejudice is expected to have effect on overall level of societal prejudice. High level of prejudice should lead to discrimination that may manifest as unfairness and, perhaps, even spite. In this paper, we investigate this idea in the classical paradigm of the ultimatum game which we theoretically modify to introduce prejudice at the level of players, terming its intensity as prejudicity. The stochastic evolutionary game dynamics, in the regime of replication-selection, reveals the emergence of spiteful behaviour as a dominant behaviour via a first order phase transition -- a discontinuous jump in the frequency of spiteful individuals at a threshold value of prejudicity. The phase transition is quite robust and becomes progressively conspicuous in the limit of large population size where deterministic evolutionary game dynamics, viz., replicator dynamics, approximates the system closely. The emergence of spite driven by prejudice is also found to persist when one considers long-term evolutionary dynamics in the mutation-selection dominated regime. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.18889 |
| By: | Andrea Attar (CEIS & DEF University of Rome "Tor Vergata"); Eloisa Campioni (CEIS & DEF University of Rome "Tor Vergata"); Thomas Mariotti (Toulouse School of Economics, CNRS); Alessandro Pavan (Northwestern University) |
| Abstract: | We study the design of market information in competing-mechanism games. We identify a new dimension, private disclosures, whereby the principals asymmetrically inform the agents of how their mechanisms operate. We show that private disclosures have two important effects. First, they can raise a principal's payoff guarantee against her competitors' threats. Second, they can support equilibrium outcomes and payoffs that cannot be supported with standard mechanisms. These results call for a novel approach to competing mechanisms, which we develop to identify a canonical game and a canonical class of equilibria, thereby establishing a new revelation principle for this class of environments. |
| Keywords: | Incomplete Information, Competing Mechanisms, Private Disclosures, Revelation Principle. |
| JEL: | D82 |
| Date: | 2025–06–28 |
| URL: | https://d.repec.org/n?u=RePEc:rtv:ceisrp:615 |
| By: | Dena Firoozi; Anastasis Kratsios; Xuwei Yang |
| Abstract: | Traditional mean-field game (MFG) solvers operate on an instance-by-instance basis, which becomes infeasible when many related problems must be solved (e.g., for seeking a robust description of the solution under perturbations of the dynamics or utilities, or in settings involving continuum-parameterized agents.). We overcome this by training neural operators (NOs) to learn the rules-to-equilibrium map from the problem data (``rules'': dynamics and cost functionals) of LQ MFGs defined on separable Hilbert spaces to the corresponding equilibrium strategy. Our main result is a statistical guarantee: an NO trained on a small number of randomly sampled rules reliably solves unseen LQ MFG variants, even in infinite-dimensional settings. The number of NO parameters needed remains controlled under appropriate rule sampling during training. Our guarantee follows from three results: (i) local-Lipschitz estimates for the highly nonlinear rules-to-equilibrium map; (ii) a universal approximation theorem using NOs with a prespecified Lipschitz regularity (unlike traditional NO results where the NO's Lipschitz constant can diverge as the approximation error vanishes); and (iii) new sample-complexity bounds for $L$-Lipschitz learners in infinite dimensions, directly applicable as the Lipschitz constants of our approximating NOs are controlled in (ii). |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.20017 |
| By: | Heng-fu Zou (Institute for Advanced Study, Wuhan University) |
| Abstract: | This paper develops a continuous-time model of contracting between a principal and many agents under moral hazard, linking dynamic contract theory to the mean field game (MFG) framework. Outputs depend on effort, competition, and both idiosyncratic and common shocks. The principal designs contracts using filtered signals that benchmark agents against peers. We show that the first-order approach remains valid: effort is linear in exposure with slope determined by the informativeness of filtered outputs. The Hamilton-Jacobi-Bellman equation implies that optimal incentives depend jointly on marginal revenue, signal variance, and intertemporal insurance. The optimal filter is the generalized least squares residual, which asymptotically eliminates common shocks as group size grows. In a linear-quadratic specialization, equilibrium exists, is unique, and is globally stable, with the uniqueness result coinciding with the Lasry-Lions MFG fixed-point condition. The framework unifies tournaments, RPE, and dynamic contracts, and explains empirical puzzles in executive pay, sales teams, and finance. |
| Date: | 2025–10–22 |
| URL: | https://d.repec.org/n?u=RePEc:cuf:wpaper:797 |
| By: | Christian Ewerhart |
| Abstract: | In games with compact pure strategy spaces, the continuity of the payoff functions is preserved in the expected payoff functions of the mixed extension. This note provides an elementary proof of this fact, showing that the commonly assumed Hausdorff property is, in fact, not needed. |
| Keywords: | Compact games, expected payoffs, weak* topology, continuity, Hausdorff separability axiom |
| JEL: | C72 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:zur:econwp:479 |
| By: | Azova, Arina; Lukyanov, Georgy |
| Abstract: | We embed observational learning (BHW) in a symmetric duopoly with random arrivals and search frictions. With fixed posted prices, a mixed-strategy pricing equilibrium exists and yields price dispersion even with ex-ante identical firms. We provide closed-form cascade bands and show wrong cascades occur with positive probability for interior parameters, vanishing as signals become precise or search costs fall; absorption probabilities are invariant to the arrival rate. In equilibrium, the support of mixed prices is connected and overlapping; its width shrinks with signal precision and expands with search costs, and mean prices comove accordingly. Under Calvo price resets (Poisson opportunities), stationary dispersion and mean prices fall; when signals are sufficiently informative, wrong-cascade risk also declines. On welfare, a state-contingent Pigouvian search subsidy implements the planner’s cutoff. Prominence (biased first visits) softens competition and depresses welfare; neutral prominence is ex-ante optimal. |
| Keywords: | social learning; informational cascades; price dispersion; search; vertical differentiation. |
| JEL: | C73 D43 D83 L13 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:131066 |
| By: | Heng-fu Zou |
| Abstract: | This paper develops a new dynamic framework for designing intergovernmental fiscal transfers by combining incentive regulation, fiscal feder alism, and mean field games. Building on Laffont and Tirole's classic theory of cost observation and hidden effort, we model a central government that offers linear transfer contracts to a continuum of local governments whose costs evolve stochastically. Local cost dynamics follow Ornstein-Uhlenbeck, Cox-Ingersoll-Ross, or mean-reverting geometric Brownian motion processes and may experience rare jump shocks. Each locality chooses unobservable cost-reducing effort, while the center optimizes the transfer rule to induce truthful reporting and efficiency. Using Hamilton-Jacobi-Bellman and Fokker-Planck equations, we characterize stationary and transitional equilibria and show that yardstick competition provides the strongest incentives with minimal fiscal cost. The model yields explicit conditions for long-run fiscal sustainability and illustrates how robust transfers can sustain effciency and equity under uncertainty. |
| Date: | 2025–10–22 |
| URL: | https://d.repec.org/n?u=RePEc:cuf:wpaper:793 |
| By: | Luigi Foscari; Emanuele Guidotti; Nicol\`o Cesa-Bianchi; Tatjana Chavdarova; Alfio Ferrara |
| Abstract: | We study the emergence of tacit collusion between adaptive trading agents in a stochastic market with endogenous price formation. Using a two-player repeated game between a market maker and a market taker, we characterize feasible and collusive strategy profiles that raise prices beyond competitive levels. We show that, when agents follow simple learning algorithms (e.g., gradient ascent) to maximize their own wealth, the resulting dynamics converge to collusive strategy profiles, even in highly liquid markets with small trade sizes. By highlighting how simple learning strategies naturally lead to tacit collusion, our results offer new insights into the dynamics of AI-driven markets. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.15995 |
| By: | L. Elisa Celis; Lingxiao Huang; Milind Sohoni; Nisheeth K. Vishnoi |
| Abstract: | Meritocratic systems, from admissions to hiring, aim to impartially reward skill and effort. Yet persistent disparities across race, gender, and class challenge this ideal. Some attribute these gaps to structural inequality; others to individual choice. We develop a game-theoretic model in which candidates from different socioeconomic groups differ in their perceived post-selection value--shaped by social context and, increasingly, by AI-powered tools offering personalized career or salary guidance. Each candidate strategically chooses effort, balancing its cost against expected reward; effort translates into observable merit, and selection is based solely on merit. We characterize the unique Nash equilibrium in the large-agent limit and derive explicit formulas showing how valuation disparities and institutional selectivity jointly determine effort, representation, social welfare, and utility. We further propose a cost-sensitive optimization framework that quantifies how modifying selectivity or perceived value can reduce disparities without compromising institutional goals. Our analysis reveals a perception-driven bias: when perceptions of post-selection value differ across groups, these differences translate into rational differences in effort, propagating disparities backward through otherwise "fair" selection processes. While the model is static, it captures one stage of a broader feedback cycle linking perceptions, incentives, and outcome--bridging rational-choice and structural explanations of inequality by showing how techno-social environments shape individual incentives in meritocratic systems. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.20606 |
| By: | Ali Shirali |
| Abstract: | From media platforms to chatbots, algorithms shape how people interact, learn, and discover information. Such interactions between users and an algorithm often unfold over multiple steps, during which strategic users can guide the algorithm to better align with their true interests by selectively engaging with content. However, users frequently exhibit inconsistent preferences: they may spend considerable time on content that offers little long-term value, inadvertently signaling that such content is desirable. Focusing on the user side, this raises a key question: what does it take for such users to align the algorithm with their true interests? To investigate these dynamics, we model the user's decision process as split between a rational system 2 that decides whether to engage and an impulsive system 1 that determines how long engagement lasts. We then study a multi-leader, single-follower extensive Stackelberg game, where users, specifically system 2, lead by committing to engagement strategies and the algorithm best-responds based on observed interactions. We define the burden of alignment as the minimum horizon over which users must optimize to effectively steer the algorithm. We show that a critical horizon exists: users who are sufficiently foresighted can achieve alignment, while those who are not are instead aligned to the algorithm's objective. This critical horizon can be long, imposing a substantial burden. However, even a small, costly signal (e.g., an extra click) can significantly reduce it. Overall, our framework explains how users with inconsistent preferences can align an engagement-driven algorithm with their interests in a Stackelberg equilibrium, highlighting both the challenges and potential remedies for achieving alignment. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.16368 |
| By: | Chen, Xuyang; Sun, Rui |
| Abstract: | This paper investigates how the OECD's global minimum tax (GMT) affects multinational enterprises (MNEs) behavior and countries' corporate taxes. We consider both profit shifting and capital investment responses of the MNE in a formal model of tax competition between asymmetric countries. The GMT reduces the true tax rate differential and benefits the large country, while the revenue effect is generally ambiguous for the small country. In the short run where tax rates are fixed, due to tax deduction of the substance-based income exclusion (SBIE), a higher minimum rate exerts investment incentives but also incurs a larger revenue loss for the small country. We show that under high (low) profit shifting costs the former (latter) effect dominates so that the small country's revenue increases (decreases). In the long run where countries can adjust tax rates, the GMT reshapes the tax game and the competition pattern. In contrast to the existing literature, we reveal that the minimum rate binds the small country only if it is low. With the rise of the GMT rate, countries will undercut the minimum to boost real investments and collect top-up taxes. Our simulations show that introducing a GMT with moderate minimum rate raises both countries' revenues and the large country's welfare. However, it may reduce the small country's welfare if the welfare weight of private income is high. |
| Keywords: | Corporate taxes, Global minimum tax, Profit shifting, SBIE, Tax competition |
| JEL: | F21 F23 H25 H73 H87 |
| Date: | 2025–09–26 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126538 |
| By: | Jason Hartline; Aleck Johnsen; Yingkai Li |
| Abstract: | We study auctions that are robust at any scale, i.e., they can be applied to sell both expensive and cheap items and achieve the best multiplicative approximations of the optimal revenue in the worst case. We show that the optimal mechanism is scale invariant, which randomizes between selling at the second-price and a 2.45 multiple of the second-price. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.21231 |
| By: | Gambato, Jacopo; Ganglmair, Bernhard; Krämer, Julia |
| Abstract: | In a model of asymmetric regulation, a firm can comply with two regulatory targets, and a regulator can audit the firm for compliance. Inspection by the regulator is imperfect, and it assesses the firm's compliance with the targets with different success probabilities. The firm fully complies only if compliance costs are low. Otherwise, the firm always prioritizes the requirement that is easier to enforce. Expanding regulatory capacity positively affects compliance with the easy-to-enforce target; however, a higher capacity can harm compliance with the hard-to-enforce target. |
| Keywords: | agency resources, asymmetric enforcement, compliance, multi-tasking, regulation |
| JEL: | H32 K20 L51 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:330314 |
| By: | Kozo Ueda; Yoshio Kamijo; Hideaki Minami |
| Abstract: | This study investigates why inflation converges only slowly to its target by combining laboratory experiments with structural estimation. We create a laboratory environment in which subjects act as ï¬ rms and set prices under Calvo-type stickiness, where profits are determined as a weighted average of competitors’ prices and an exogenously given aggregate price. The experimental results show that both higher aggregate inflation and stronger strategic complementarity hinder convergence to the theoretical equilibrium under rational expectations. Using Bayesian MCMC estimation, we systematically compare subjects' behavior with rational-expectations predictions, allowing for small deviations motivated by bounded rationality. The results reveal that subjects overestimate strategic complementarity, which contributes to delayed inflation convergence. |
| Keywords: | strategic complements, sticky prices, bounded rationality |
| JEL: | C92 E32 E52 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2025-57 |
| By: | Axel Gautier; Jean-Christophe Poudou |
| Abstract: | In many industries, platforms compete with incumbents that are open to all consumers, whereas platforms require user affiliation. Consequently, platforms face two layers of competition: for the market, to attract users, and in the market, to compete with incumbents. We develop a dynamic model integrating these layers, showing that as platform affiliation grows, in the market competition intensifies, pushing incumbents toward more aggressive pricing. Conversely, for the market competition diminishes, reducing the platform's incentive to compete aggressively. This interplay generates dynamic pricing behavior that can be non-monotonic over time, capturing the shifting incentives driving platform-incumbent competition across both dimensions. |
| Keywords: | platform competition, Uber economy, competition for the market, market affiliation |
| JEL: | L11 L13 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12218 |
| By: | Christian Ewerhart |
| Abstract: | This paper revisits the n-player rent-seeking contest with homogeneous valuations and increasing returns. Our main result says that, for any m ∈ {2, . . . , n − 1}, there are threshold values 1 |
| Keywords: | Rent-seeking contests, increasing returns, asymmetric equilibria, monotone comparative statics |
| JEL: | C72 D72 D74 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:zur:econwp:477 |
| By: | Nizar Riane |
| Abstract: | This paper revisits the Arrow-Debreu general equilibrium framework through the lens of effective trade, emphasizing the distinction between theoretical and realizable market interactions. We develop the Effective Trade Model (ETM), where transactions arise from bilateral feasibility rather than aggregate supply and demand desires. Within this framework, we establish the main properties of the price-demand correspondence and prove the existence of Nash equilibria, incorporating production, money, and network topology. The analysis extends to time, uncertainty, and open economies, revealing how loanable funds and exchange rates emerge endogenously. Our results show that equilibrium is shaped by transaction constraints, subjective pricing, and decentralized negotiation, rather than by universal market-clearing conditions, and thereby call into question the foundations of welfare theory. Anticipation is modeled via the conditional mode, capturing bounded rationality and information limitations in contrast to the rational expectations hypothesis. The ETM thus offers a behaviorally and structurally grounded alternative to classical general equilibrium, bridging microfoundations, monetary dynamics, and temporal consistency within a unified framework. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.16003 |
| By: | Grey Gordon; Pablo Guerrón-Quintana |
| Abstract: | Hard sovereign defaults—defaults with large haircuts—are associated with deeper recessions, longer durations, and, as we show, larger devaluations than soft defaults. We rationalize these regularities by developing a single-proposer noise bargaining game and embedding it in a two-sector sovereign default model. Creditors weigh the sovereign's haircut offers against likely future offers and idiosyncratic valuation shocks. In short-lived recessions, creditors tend to reject large proposed haircuts, anticipating better terms as the economy recovers—endogenously correlating default intensity with adverse outcomes. Two years after default, our decomposition attributes nearly 80% of the observed output differentials to selection on different shock realizations. |
| Keywords: | Default; Sovereign; Debt; Growth; Haircuts |
| JEL: | F34 C78 E32 |
| Date: | 2025–10–22 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedrwp:101987 |
| By: | Ciucci, Salvatore |
| Abstract: | There are many evidences which prove that cartels’ price leads to an economic inefficiency, due to the reduced consumers welfare. Antitrust authorities have set up different ways to defeat and prevent collusive agreements, but as widely showed by the literature, deterring collusion may have adverse effects, like higher price in surviving cartels, reduced turnover of firms’ employees, and disincentive for competing firms to cooperate, in the sense that if firms exchange information about the evolution of demand or costs, then they may adopt better choices; moreover, deterring collusion may have even a pro-collusion effect. The paper suggests an additional anti-cartel tool which does not have side effects, and supporting no cost, it can get worse collusion stability. Analysing a supergame of collusion, in a Bertrand duopoly framework in which is run a two-stage lottery, we show that deviation strategy becomes more attractive, even if lottery jackpot tends to zero. |
| Keywords: | Political Economy, Public Economics |
| Date: | 2025–10–22 |
| URL: | https://d.repec.org/n?u=RePEc:ags:feemwp:373385 |